Forex Crunch » Euro

Deutsche Bank More Leveraged than Lehman

Yohay — Thu, 02 Feb 2012 10:42:08 +0000

A new document published by Deutsche Bank shows that in Q4 2011, the large German bank was leveraged at a ratio of 40:1 according to the International Financial Reporting Standards (IFRS). This is higher than Lehman Brothers had.

Deutsche Bank is Germany’s largest bank, and the biggest foreign exchange dealer in the world. There has been significant correlation between shares of European banks such as Deutsche Bank and the value of the euro in recent months.

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Germany’s Negative Yields – Another Reflection of Distrust in Periphery

Yohay — Mon, 09 Jan 2012 14:00:54 +0000

For the first time, Germany’s bond auction yielded negative yields. Its 6 month bond auction resulted in 3.9 billion euros in fresh funds, with a yield of -0.012%.

This means that investors are willing to take a loss in order to hold on to the precious German papers. This emphasizes the loss of trust in peripheral countries, despite all the efforts.

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A remarkably resilient euro

Yohay — Mon, 21 Nov 2011 08:37:02 +0000

Returning to an observation we have made frequently over recent months, it remains extremely interesting that the euro is not significantly weaker than it is. Beset by three sovereign bailouts, collapsing bond and bank equity prices, extreme funding strains, an incredibly clunky policy decision-making process, plummeting business confidence and increasing signs that Europe may already be in recession – most would have expected the euro to be much lower. At around 1.3550 currently, it is only a little below the twelve-month average, and remains some 20% above the level when notes and coins came into circulation almost a decade ago.

Traders, investors, banks, sovereign wealth funds – all have supposedly been avoiding the single currency to some degree over the past few months. Actually, it is fairly critical to attempt to explain why the euro has been so resilient. A number of explanations come to mind. Firstly, the other major central banks (the Fed, BoJ and BoE) have all undertaken substantive quantitative easing, which, all things being equal, results in a major increase in the supply of the currency. For its part, the ECB has not given in to central bank sin by printing money. Secondly, the ECB was the only one of the major central banks to raise interest rates this year in response to perceived inflation threats. It may have been a huge policy error, but nevertheless it did help the single currency for a time.

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German Exporters’ Organization: No Need for the Euro

Yohay — Wed, 09 Nov 2011 14:04:24 +0000

Anton Börner, head of Germany’s BGA organization, said that German exporters can “live without the euro”. BGA represents mostly small and medium sizes companies. Börner’s alternative for the current euro framework is a bloc of the richer euro-zone countries.

This statement is quite surprising. The Deutschmark would be of a much higher value if it weren’t for the euro. Until 2005, Germany was considered to be “the sick man of Europe”.

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Payrolls could well be on the soft side

Yohay — Fri, 03 Jun 2011 08:10:32 +0000

A close examination of recent labour market evidence does not augur too well for non-farm payrolls when they are released later today. Continuing claims for the weeks in between the survey period actually rose by more than 50K, the ADP survey recorded a paltry 38K increase in May, and the employment component of the ISM manufacturing survey dipped sharply last month. One suggestion is that some employers have been reducing their workforce as a response to the growing cost of energy. It may also be the case that some industries have been experiencing supply shortages (such as the automotive industry) due to the lack of parts coming out of Japan, resulting in some hesitation regarding fresh hiring. The consensus is for an outcome of around 170K, but the risk seems skewed to the downside.

Guest post by FXPro

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The worsening debt threat under the euro

Yohay — Thu, 31 Mar 2011 08:48:16 +0000

Of course, one of the more remarkable aspects of the past week has been the resilience of the euro in the face of the underlying developments of the sovereign debt crisis. This could well be repeated later today when Ireland publishes the results of the latest stress tests on its banking sector, where nationalisation of two more institutions appears likely. But what are worrying are the self-destructive forces that are now at play, which stem from the weak incentives and structures required to reach any lasting or binding agreements at the pan-eurozone level.

Guest post by FXPro

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The euro stands its ground

Yohay — Fri, 25 Mar 2011 09:43:28 +0000

The euro was one of the best performers during the European session on Thursday, despite the looming election in Portugal, the assumed EU bailout and the prospect of a delay to agreement on reform of the EFSF. There were three over-arching reasons for the single currency’s vigour. The first was the weakness of both the dollar and more particularly sterling, the latter suffering after soft retail sales numbers for February. Secondly, despite all the noise around the EU sovereign crisis it is still interest rates that are the primary driver of the euro right now so, with PMI data showing a solid eurozone core, the currency is still gunning for an interest-rate increase at next month’s ECB meeting.

Guest post by FXPro

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11 Forex Predictions for 2011

Yohay — Tue, 04 Jan 2011 15:00:56 +0000

Exciting 2010 is behind us, and it’s time to discuss what can happen in 2011. Here are the expectations for currency movements and also for trends in forex trading.

It’s very hard to make predictions for a full year, because so much can happen, but there are some trends that can continue or fade away. Let’s start:

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Bank of Ireland Haircut

Yohay — Thu, 09 Dec 2010 03:23:49 +0000

Following the haircut forced upon bondholders of the Anglo-Irish bank, also the Bank of Ireland is announcing ”haircuts” or burden sharing if you wish. Tracy Alloway reports about this development, that isn’t too good for the Euro, even if it’s a smoother razor is used. Read it here.

This is not the first haircut for an Irish bank, and unfortunately not the last. On November 26th, talks about burden sharing of senior debt holders strengthened, but after the deal was cut between the EU / IMF delegation and the Irish government, it became clear again that senior bondholders (contrary to junior ones) were not to be touched by any scissors.

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Spanish House Prices May Be Lower Than Thought – Problem for Banks

Yohay — Sun, 28 Nov 2010 09:42:51 +0000

There isn’t enough reliable information about the prices of homes in Spain. Most of the data is based on asking prices rather than on actual deals. A growing portion of assets held by Spanish banks are foreclosed homes – currently estimated at 60 billion euros. If they’ll need to reassess prices, they’ll be in deeper trouble.

This article in the Wall Street Journal displays the problem:

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