News analisis

USD/CAD hits 1.0700 on data

The Canadian dollar is now sharply depreciating vs. its southern counterpart, lifting the USD/CAD to the neighbourhood of 1.0700 the figure on Friday...

The Canadian dollar is now sharply depreciating vs. its southern counterpart, lifting the USD/CAD to the neighbourhood of 1.0700 the figure on Friday.

USD/CAD stronger on data

Spot gained extra legs after the disappointing figures from the Canadian labour market showed that the employment decreased by 9.4K during June vs. forecasts for a 20K increase; in the meantime, the jobless rate ticked higher to 7.1% vs. 7.0% expected and previous. “We believe that market expectations for a less cautious BoC message stemming from the upside surprise in May's inflation will be disappointed. Such an outcome, following on the heels of a poor employment print today, should see USDCAD move into the mid-1.07s”, commented Shaun Osborne, Chief FX Strategist at TD Securities.

USD/CAD levels to consider

The pair is now advancing 0.49% at 1.0703 with the next resistance at 1.0762 (high Jun.23) and then 1.0806 (200-d MA). On the downside, a breach of 1.0620 (low Jul.3) would open the door to 1.0601 (61.8% of 1.0182-1.1279) and finally 1.0589 (2014 low Jan.2).

Mexico Industrial Output (YoY) increased to 1.6% in May from previous -0.6%.

India FX Reserves, USD up to $316.39B from previous $315.78B.

GBP/USD capped by 1.7150

The sterling continues to meander in a 30-pip range vs. the greenback on Friday, relegating the GBP/USD to the 1.7120-1.7150 band...

The sterling continues to meander in a 30-pip range vs. the greenback on Friday, relegating the GBP/USD to the 1.7120-1.7150 band.

GBP/USD closing the week in red figures

Spot is posting its first weekly pullback after five consecutive advances, climbing from the 1.6700 area in early June to multi-year highs around 1.7180 in the past week. The solid pace of the UK recovery plus expectations of a rate hike by the BoE sooner than markets could anticipate would be behind the GBP’s outstanding performance. “With 345,000 jobs having been created in the past three months alone and business surveys suggesting the recovery is gaining momentum we have moved forward our expectation for the first rate hike to November along with raising our 2014 and 2015 GDP growth forecasts to 3.3% and 3%, respectively”, assessed James Knightley, Analyst at ING Bank.

GBP/USD relevant levels

At the moment the pair is down 0.01% at 1.7131 facing the next support at 1.7105 (low Jul.10) ahead of 1.7095 (low Jul.9) and finally 1.7085 (low Jul.8). On the upside, a break above 1.7168 (high Jul.10) would expose 1.7180 (2014 high Jul.4) and then 1.7203 (high Oct.21 2008).

EUR/USD back to 1.3600

The shared currency is now returning to the proximity of 1.3600 the figure, dragging the EUR/USD from earlier session tops around 1.3630...

The shared currency is now returning to the proximity of 1.3600 the figure, dragging the EUR/USD from earlier session tops around 1.3630.

EUR/USD unmotivated, focus on Portugal

Fortunately, this dull trading week is about to finish. Despite the recent headlines and jitters coming from Portugal on its biggest bank – Banco Espirito Santo - the EUR managed pretty well to keep the trade around or above the 1.3600 handle, closing the week with a marginal gain so far after the previous weekly pullback. “We are inclined to stick with the bearish bias again for the week ahead given spot today is already lower from today’s high in response to the news that an entity in Portugal’s Espirito Santo Financial Group missed some short-term debt repayments”, said analysts at BTMU.

EUR/USD levels to consider

As of writing the pair is down just 0.01% at 1.3606 and a break below 1.3588 (low Jul.8) would target 1.3576 (low Jul.7) en route to 1.3574 (low Jun.23). On the other hand, the initial resistance lines up at 1.3639 (Tenkan Sen) ahead of 1.3651 (high Jul.10) and finally 1.3664 (high Jul.3).

Markets cautious on BES unease - Investec

Jonathan Pryor, Corporate Treasury Analyst at Investec, remarks the growing concerns around the biggest bank in Portugal...

Jonathan Pryor, Corporate Treasury Analyst at Investec, remarks the growing concerns around the biggest bank in Portugal.

Key Quotes

"Memories of the euro crisis we revived again yesterday, with European equity markets tumbling and Portuguese 10yr bond yields rising 21bp over concerns about the financial health of Banco Espirito Santo(BES), Portugal’s largest bank. The situation stems from what auditors have labelled ‘material irregularities’ at BES’ parent holding company Espirito Santo International (ESI) and its subsequent delayed debt payment and talk of a debt restructure."

"Due to a labyrinthine cross shareholding structure market concern is over BES’ potential exposure and whether or not it may require a further recapitalisation, possibly by the Portuguese government. European markets are stable at the open and a regulatory filing overnight suggesting that BES has a capital buffer of €2.1bn against a total group exposure of €1.2bn may ease some concerns, but given the opaqueness of the group structure and continued talk over restructure markets are likely to remain nervous into the weekend."

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