Investiční bankovnictví (Komerční banka)
World markets  |  March 18, 2013 07:56:00

Euro falls to home week for more than three months minimum

Even if it does for most of last week did not seem to eventually straighten euro on a weekly maximum. The euro against the dollar for most of last week trying to get under the surface of 1.3000 USD / EUR exchange rate on Thursday even got close to the level of 1.2900 USD / EUR. At the very end of the week, the rate shot up to 1.3100 USD / EUR.

Dollar for most of last week supported the favorable macroeconomic data showing an improving growth dynamics. We have seen how stronger retail sales reflecting stronger consumer demand, so on Friday released statistics February industrial production, which also grew faster than expected. Core inflation, however, has not accelerate, as shown by the February data, which cooled market expectations that the U.S. central bank to the forthcoming volumes somehow restrict redemptionsassets in the third round of quantitative easing.

Saturday morning brought another standard solution of the European debt crisis, this time related to Cyprus. EU summit decided on financial assistance to Cyprus. The island nation will be the first use of resources bailout fund ESM. However, this is strictly conditional. Cyprus must also privatize, raise corporate taxes from 10% to 12.5% ??and was used for the first time a non-standard solution in the form of taxation on bank deposits. Financial assistance to Cyprus and will also help savers in banks (deposits up to EUR 100 000 will be taxed at a rate of 6.75%, deposits above this level the rate of 9.9%). This totally unique step was chosen due to the extreme size of the Cypriot financial sector that exceeds five times the entire Cypriot economy as measured by GDP and the country's banking system uses a number of foreign companies due toregistration favorable conditions, favorable tax regime and low willingness Cypriot authorities to transmit information. The question is whether another controversial step will not have quite the opposite effect of stabilizing. Think of how markets reacted negatively to the PSI program for Greece. Rating agency Moody's has warned that it is a negative message to depositors and other European countries. The euro fell (course already this morning attacked 1.2900 USD / EUR), while the Swiss franc strengthened, Asian stock markets were under strong pressure výprodejním (Japanese NIKKEI stock index today is more than 2.5%), while the increase in demand for gold led to an increase in its price and attacking in the form of monthly maximum levels of 1 600 USD per troy ounce.

In addition to solving the Cyprus problem is worth mentioning the fact that it had a longer time to repay financial assistance to Portugal and Ireland. No other major decisions did not summit. Were repeated phrase in recent weeks, that should be part of the fiscal consolidation and watch the growth consequences of the measures taken, particularly with regard to the impact on employment, especially in light of the high unemployment rate among young Europeans. A surprise may be the attitude of Germany. Despite the upcoming September parliamentary elections the government wants to continue with fiscal consolidation.

Home of the week will be fundamental point of view completely uninteresting. Everybody will watch the first trading hours on all financial markets in the light of Cyprus' tax deposits. "Needless to say, even if it's endorsed by the EU summit, itself Cypriot Parliament yesterday to get a vote would take place today, it is a public holiday in Cyprus and banks are closed (according to press reports, should remain closed tomorrow). Approval of the measure in the Cypriot Parliament is not wholly a matter. If it had not been approved, summit decision would be adopted. Either way, both options mean a significant increase in uncertainty and the rise in risk aversion in the markets, which should record a further strengthening of the U.S. currency.

An important event of this week's meeting of the U.S. central bank, which will be published on Wednesday night. As for interest rates, it is clear that, from this point of view, no action at all.Central bankers clearly declared that the period of zero interest rates will last as long as the unemployment rate drops below 6.5% until inflation expectations in the two-year horizon, not scale above 2.5%. The problem is that so far transparent central bankers were at when to terminate the third round of QE. And from this perspective, we could not wait any newspaper. The timing of the completion of the "printing money" is crucial for the U.S. dollar. Printing money is acting in the direction of weakening or inhibiting its pronounced strengthening.

Author: Jan Vejmělek

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