WORLD FOREX: Euro Climbs Before Greek Debt-Swap Deal, ECB Decision

Thursday, Mar 08, 2012

-- Euro slightly higher on growing optimism of a successful Greek debt-swap deal

-- Talk of China monetary easing in Asian hours also contributes to market optimism

-- Little expected from ECB later, no change from the BOE

-- Yen under pressure after Japan posts record current-account deficit in January


 
   By Jessica Mead 
   Of DOW JONES NEWSWIRES

LONDON (Dow Jones)--The euro firmed against the dollar in European trading hours Thursday after a shaky few days' trading, as currency traders grew more confident about a successful Greek debt-swap ahead of an interest rate decision from the European Central Bank.

European investors kicked off the London session in a positive mood, buoyed by market speculation in Asian hours of additional monetary easing from China and a growing belief that Greece will nail its debt-swap deal, with the Greek government expected early Friday to disclose the scale of investor participation.

"As we move closer to the final Greek deadline, markets are--rightly--optimistic that we will avoid the worst-case scenario where Greece doesn't even meet the threshold for introducing collective action clauses," said Elsa Lignos, senior currency strategist at RBC Capital Markets in London.

That helped the euro trade as high as $1.3233 against the dollar, while a much stronger-than-expected January German industrial production figure also boosted the common currency.

Strategists are expecting little from the ECB Thursday, seeing no change to its benchmark refinancing rate at 1245 GMT. They are also not holding out for much guidance from ECB President Mario Draghi at his 1330 GMT press conference, given the proximity of Greece's debt restructuring and last week's long-term refinancing operation, which helped pump another half a trillion euros of cheap money into the euro-zone banking system.

Draghi may give some indication that the ECB is happy to wait and see on policy for now and that a third Longer Term Refinancing Operation is not on the cards at the moment. That said, changes to the ECB's staff growth and inflation forecasts could be closely watched.

Sterling was unmoved after the Bank of England chose to keep the key interest rate at 0.5% and the central bank's asset purchase target at GBP325 billion.

Elsewhere, the yen came under pressure after Japan posted a record current-account deficit in January amid flagging exports and soaring energy imports.

"[The] Japanese government has brought upon itself: in its race to destroy its nuclear power generation programs everywhere it is putting itself in very real jeopardy as it has no choice but to import more and more energy from abroad in relentless fashion," said Dennis Gartman in his daily investment letter.

The Brazilian real was also weaker after the country's central bank surprised markets with a bigger-than-expected rate cut.

Other upcoming events include the Bank of Canada's monetary policy announcement at 1400 GMT and U.S. weekly jobless claims data at 1330 GMT, with key U.S. non-farm payrolls figures due Friday.

At 1201 GMT, the euro was trading at $1.3240 against the dollar, compared with $1.3150 late Wednesday in New York, according to trading system EBS. The dollar was at Y81.63 against the yen, compared with Y81.08, while the euro was at Y108.08, compared with Y106.62. Meanwhile, the pound was trading at $1.5801 against the dollar, compared with $1.5741 late Wednesday in New York.

The ICE Dollar Index, which tracks the greenback against a basket of currencies, was at 79.340, compared with 79.684 late Wednesday in New York.

A summary of key levels for chart-watching technical strategists is below:


 
Forex spot:       EUR/USD    USD/JPY    GBP/USD    USD/CHF 
 
Spot 1128 GMT     1.3226     81.56      1.5789     0.9113 
3 Day Trend       Range      Range      Range      Range 
Weekly Trend      Bearish    Bullish    Range      Range 
200 day ma        1.3492     78.66      1.5814     0.9062 
3rd Resistance    1.3333     82.44      1.5915     0.9202 
2nd Resistance    1.3290     81.87      1.5881     0.9177 
1st Resistance    1.3242     81.60      1.5833     0.9143 
Pivot*            1.3137     80.96      1.5732     0.9174 
1st Support       1.3183     81.07      1.5750     0.9106 
2nd Support       1.3164     80.94      1.5725     0.9066 
3rd Support       1.3135     80.58      1.5697     0.9021 
 
 
Forex spot:       EUR/JPY 
 
Spot 1128 GMT     107.88 
3 Day Trend       Range 
Weekly Trend      Bullish 
200 day ma        106.15 
3rd Resistance    109.95 
2nd Resistance    108.74 
1st Resistance    108.47 
Pivot*            106.37 
1st Support       107.02 
2nd Support       106.60 
3rd Support       106.32