Financial Advisor

Daily Report: Euro Recovers Mildly as Greece Will Accelerate Asset Sales, Selling Focus Turning to Sterling

Euro recovers after breaching 1.4 psychological level briefly yesterday. Sentiments stabilized a bit after Greek government endorsed an accelerated asset-sale plan and EUR 6b of budget cuts for getting extra financial aids after it's CDS and 10 year yield both jumped to record high. The sale of assets include stakes in Hellenic Telecommunications Organization SA by the end of next month and Public Power Corp SA, Hellenic Postbank SA, in a total market value of EUR 2.1b. Also, Greece said it would create a fund to accelerate the sales and intend to raise EUR 50b by 2015, including EUR 35b of real estate. The budget cut will worth around 2.8% of GDP for pushing down to 7.5% deficit target.
Selling focus has probably shifted to Sterling on talk that Moody's will considering downgrading debt for 14 UK banks and building societies. The GBP 1T in government bailouts and guarantees would probably account for two to five credit grades for larger UK banks and one to five notches for smaller banks. Government withdrawing support would increase credit risk and triggers downgrades. It would take around three months to carry out the review and gauge the level of state support incorporated in to the credit rating.
New Zealand dollar is broadly higher today as the latest survey from RBNZ showed two year inflation expectation rose in the second quarter to 3%, highest since Q3 2008, up from prior expectation of 2.64%. For 1 year horizon, CPI is expected to reach 3.12%, up from prior expectation of 2.87%. Aussie and Kiwi are also lifted by mild recovery in commodities.
German Q1 GDP was unrevised at 1.5% qoq. Ifo business claim will be a mail focus in European session and is expected to drop slightly to 113.7 but is vulnerable to downside surprise. UK public sector net borrowing will be another focus and is expected to drop to GBP 4.4b in APril. Eurozone industrial orders, UK CBI reported sales and US new home sales will be released.
NZD is comparative stronger against AUD in the past two weeks but it's too early to confirm a change in trend in AUD/NZD. The cross is still staying well inside near term rising channel. Focus will be on the channel support (now at 1.3154). While the current fall might continue lower to extend the consolidation from 1.3792, we'd still expect recent rally to resume sooner or later as long as this channel support holds. Above 1.3700 will bring rally resumption towards 1.4 psychological level. Nevertheless, sustained trading below the channel will bring deeper fall towards 55 weeks EMA (now at 1.3076) instead.

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