Denmark Continues T Bill Auctions on Easing of Kroner Peg to the Euro

The Danish Government recommenced public sale of Treasury bills as pressure on the kroner’s ceiling to the single currency eased. The website of Denmark’s central bank published an announcement that DKR 100 million worth of T-bills due this June 1st were auctioned at a yield equal to (negative) 0.9 percent.

Meanwhile, DKR 1 billion for September 1 were sold at a yield equal to (negative) 0.75 percent. This may be an indication that severe pressure on the kroner’s cap to the euro has gone down even as negative profit would have been anticipated following the decision of the central bank to fix negative benchmark rates in July of 2012.

The central bank used up billions of dollars to defend the ceiling. Speculators presumed that this would be removed after the Swiss National Bank removed its cap versus the euro last January.

It pushed down the deposit rate further forcing the government to put on hold bond sales and intervened assertively in FOREX markets in answer to this assumption. Foreign reserves increased to a record high.

Earlier in March, an economic team from Goldman Sachs helped alleviate speculations stating that Denmark has the capability to defend the shared currency’s peg.

Euro Plunges versus US Dollar

The euro currency fell versus the US dollar due to apprehensions that Greece will run out of money before any aid is released by the troika of creditors.

Nevertheless, the Greek government was positive about the negotiations for the rescue package.

The shared currency was behind 0.7 percent against the US currency dollar at $1.0813. However, it performed better than the yen going up 0.2 percent at 129.94 Japanese yen.

The quarterly regression reached 10.6 percent which is said to be the biggest since the last quarter of 1992.

The euro fared better versus the yen, up 0.2 percent at 129.94 yen.

Economic sentiment index of the European Commission scaled up to a peak of 103.9 this month bolstered by low energy prices and the ECB’s stimulus agenda.

Meanwhile, the US dollar index increased 98.054 following continuous losses in previous weeks. The greenback was up 0.9 percent against the yen at 120.18 yen, while the sterling was down 0.6 percent against the dollar at $1.4796.

Concerns were softened by upbeat data in the Euro region. A recent report underscored confidence in the European economy climbing to the highest since July of 2011. Likewise, there is affirmative reading on German inflation increasing hopes the region can stay away from deflation.

Market analysts say the euro is weighed down by different policy paths undertaken by the European Central Bank and US Federal Reserve. They also believe the EU currency will be in equivalence with that of its US counterpart within the year.

UK Pound Sterling to US Dollar

There will be highs and lows for the pair of UK Pound Sterling and US Dollar this week influenced by publication of US data such as personal income, spending and consumption expenditures along with home sales.

Statistics on US consumer confidence are expected to decline from 96.4 to 96.3 this month. Even statements of US Fed officials can affect exchange rates of USD and GBP, USD and EUR as well as USD and CAD.

There will be pressure on USD with the publication of MARKIT PMI for manufacturing, ISM Prices Paid and Manufacturing, MBA Mortgage Applications, and Employment Change.

Meanwhile, statistics about the national economy are also expected this week. The US Dollar movement can have effects on the market. Also to be released are initial unemployment and continuing claims, trade balance and factory orders.

Improvements in the labor market will likely cause a rally of the US currency as the central bank said before that tightening in unemployment can propel interest rate increases.

However, the jobless rate is not expected to move which can turn out as an upbeat development. Trading on the US dollar trading will surely be influenced by changes in Non-Farm Payrolls, average hourly earnings, and changes in household employment.

Gold Declines for Second Day

Gold plunged for the second day after going up to a three week peak until March 26 after the statement of Fed chair Janet Yellen that she is expecting rates to go up in 2015.

Prices increased previously after Saudi Arabia led airstrikes on Shiite insurgents in Yemen which spurred haven demand for gold on apprehensions hostilities may upset oil supplies. Meanwhile, gold holdings scaled up for the seventh week, according to data provided by Commodity Futures Trading Commission.

Bullion for immediate settlement dropped 0.2 percent to $1,195.91 per ounce. It was recorded at $1,197.50 in Singapore. The precious metal gave up 0.5 percent to stop the longest stretch of profits since 2012. However, it is still expected to achieve the first quarterly growth since June of last year.

Meanwhile, silver also retreated and Shanghai gold declined for the second day.

The Australia and New Zealand Banking Group also observed the regression of gold due to economic and political developments. Gold for delivery in June lost 0.3 percent to $1,196.80 at the COMEX. On the other hand, bullion (99.99 percent purity) gave up 0.3 percent to 239.80 Yuan per gram or $1,200.10 per ounce at the Shanghai Gold Exchange.

Silver for prompt delivery plunged 0.2 percent to $16.9194 per ounce. It is expected to go up 7.6 percent within the quarter. Platinum had no significant change at $1,136.75 per ounce and was headed for a third consecutive quarterly loss. Palladium metal also declined 0.3 percent to $739.25 per ounce.

Japanese Yen Gains versus US Dollar

The Japanese yen erased past losses against the US dollar in Asian trading and remained unaffected above 119 handle as investors ignored lackluster macro data from Japan and awaited the GDP report of the US.

The currency pair of USD and JPY traded flat at the 119.20 level and bounced off session highs of 119.41 during the initial session. This pair wiped out previous gains as traders absorbed the weak Consumer Price Index of Japan while retail sales brought about new losses. Investors are expected to look for new incentives henceforth.

In addition, weak treasury yields for both 10-year and 2-year notes also pulled down the USD and JPY. US dollar index traded even at the 97.62 level.

The next resistance is seen at 119.41 levels and can possibly extend gains to 119.85. On the downside, immediate support is perceived at 119 below the 118.65 levels.

Traders are now focusing on vital US macro figures which include gross domestic product along with consumer sentiment statistics for further direction related to the pair.

Greece Submits New List of Reforms to Creditors

Athens drafted a new list of structural reforms which is submitted to creditors yesterday even as the Greek government said it will ceases fulfilling debt commitments if negotiations faltered and no assistance is given to the hard-pressed nation.

Minister for International Economic Affairs Euclid Tsakalotos stated his country was seeking an accord and could exit the Union in case of negative outcome. However, they are always amenable to a compromise.

Representatives of the European Union, ECB and IMF are expected to study the proposed reforms closely.

Greece has come up with 18 items in its revised package of transformation that will hopefully release £7.2billion worth of financial assistance.

The minister said Athens will not give up its anti-austerity stance and instead focus on payment of wages and pensions.

An unidentified Greek official insisted the reform-for-cash arrangement does not contain recessionary measures.

On the other hand, lenders were adamant that such measures are inevitable if Greece wants its economy to recover.

The proposal projected a GDP growth of 1.4 percent for 2015 and reduction of primary surplus which is anticipated to reach 1.5 percent this year.

The Euro working group will be responding to this new package on Monday.

Meanwhile, Fitch Ratings relegated long-term foreign as well as domestic currency default ratings of Greece from “B” to "CCC". Likewise, ratings on primary unsecured overseas and local currency bonds were also reduced to "CCC". Temporary FOREX IDR was downgraded from “B” to "C"

The next schedule for review (Fitch sovereign rating on Greece) is on May 15.

Oil Prices Surge as Saudi Launches Air Strikes in Yemen

Prices of crude oil climbed up after Saudi Arabia let loose air strikes against Iran and its allies in Yemen. Oil prices surged particularly in Asia as air forces of the Saudi Arabian coalition made up of 10 countries started bombing selected targets.

Brent crude practically touched 60 while WTI broke resistance to almost 50.00 and for a short time touched 52.00. However, the two benchmarks recovered later during Asian trading.

At the start, markets were apprehensive regarding possible supply interruptions along with likelihood that hostilities will spread to the rest of the Middle East.

Yet some of these worries eased after Asian importers said supply disruptions did not bother them at all.

These offered support to the usual safe bets in the FOREX markets like the yen and Swiss franc.

Meanwhile, the dollar dropped to 118.33 yen which is the weakest since February 20 before rallying to 118.73. It also reached a low versus the franc (0.9491 francs).

The bombing of Yemen is expected to heighten the conflict with Iran even if Yemen is not a principal producer of crude oil. At any rate, the global market was shaken because Saudi Arabia is the biggest oil exporter in the whole world.

Analysts are also concerned with the approach of the euro zone in handling this situation since Saudi Arabia exports oil to Europe through the shoreline of Yemen. Hence, the continent’s importers will most likely be affected than Asian traders.