11th of October 2011 - Fundamental Forex Market Overview

DAILY MARKET COMMENTARY
11 October 2011 – 8:00 GMT
Tuesday

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Market Analysis Desk
Foreign Exchange Research: www.fibosignals.com/5585/resources.html
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FUNDAMENTAL ANALYSIS at 0800 GMT

USD
Risk appetite has been stable in Asia, mainly in reaction to improving sentiment about the EU debt crisis, better than expected macro data, and after news that China's government plans to boost its stakes in the country's biggest banks. In Europe, Greek Finance Minister Venizelos said yesterday that the troika has concluded discussions. An official statement in which the troika inspectors will detail whether they believe that Greece has made enough progress to receive its next aid tranche will now be released earlier than expected, and crucially, ahead of the next EU summit.

On the data front consumer confidence in Japan and business confidence in Australia rose in September. In Germany, exports in August rose to record levels, suggesting that business activity in the Eurozone's largest member state will not slump, dampening the notion that inflation expectations could fall considerably from current levels. Alongside better risk sentiment, still stretched short positioning suggests EURUSD remains a buy on dips for now. The EU summit originally planned for Oct. 17 has now been postponed to Oct. 23. Most Asian stock market indices are trading in the black, with the Nikkei up by 2.11%. EURUSD traded 1.3617-1.3654 and USDJPY 76.63-76.76. Ahead today, investors will focused on Slovakia's parliamentary vote on whether to ratify enhancements to the EFSF. We expect them to approve enhancements.

EUR
With the EFSF ratification process in all 17 Eurozone countries almost complete, attention now turns to the Slovakian parliament which is scheduled to hold a vote on ratification some time after 1100GMT on Tuesday. A junior party in the four-party coalition government has as recently as Monday night, pledged to vote down the Bill. Without the full support of government parties, opposition votes would be needed to secure safe passage of the Bill.

Greece's Finance Minister Venizelos said discussions with the troika on plans for 2011 and 2012 have concluded, and negotiations are now focused on 2013 and 2014. Reuters, citing an unnamed source, said that the EU, IMF and ECB inspectors are expected to wrap up Greek aid talks on Monday and issue a statement by Tuesday.

Greece's Deputy Prime Minister Pangalos said there is no possibility of anyone leaving the Eurozone or being kicked out. He added that Chinese investors are currently looking into the possibility of buying state assets.

In Germany, exports in August rose to record levels, suggesting that business activity in the Eurozone's largest member state will not slump, dampening the notion that inflation expectations could fall considerably from current levels. Alongside better risk sentiment, still stretched short positioning suggests EURUSD remains a buy on dips for now.
AUD
Business confidence in September rose to -2 from -9 in August, suggesting that the lower AUD and still firm demand conditions helped ease the corporate sector's worries about growth prospects. The improvement in confidence suggests that corporates will be more willing to hire, especially as manufacturing activity is expected to rise again. This in combination with stable risk sentiment suggests that AUDUSD remains a buy on dips for now.


A. White
Analyst at Fibosignals.com


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