Investors await outcome of eurozone finance minister meeting

Wednesday, February 11, 2015

Market volatility increased as the dollar index recovered previous losses as investors anticipate the outcome of an emergency meeting of eurozone finance ministers later on today. The dollar index added a modest 0.3% yesterday, recovering the previous session’s losses with investors seeking out safety in the greenback as market volatility continues to spike amid choppy trading. The majority of global equity benchmark indices traded tentatively higher yesterday as speculation that central banks would continue to offer monetary support to lacklustre markets encouraged modest risk taking.

The euro remained under pressure yesterday, ending the session at 1.1321 after intraday losses saw support towards 1.1273 tested. With the outlook for the Greek bailout and potential for a Greek exit from the eurozone still uncertain we expect currency markets to trade with considerable volatility in the coming sessions. Wolfgang Schaeuble, Germany’s finance minister, seemingly put the kibosh on giving Greece a much needed helping hand stating that there were no plans to give the indebted nation any extension on the existing aid programme in order to negotiate more favourable terms, accordingly investors will be paying close attention to the outcome of today’s meeting. Bundesbank president, Jens Weidmann went further in his criticism of the potentially softer bailout terms stating that any short term support would need to be backed by taxpayer money instead of ECB funding, shifting the focus of the recovery to fiscal rather than monetary policy.

Spot gold prices erased Monday’s gains during yesterday’s trading session on hopes that a resolution between eurozone members can be reached. The precious metal traded towards $1,245/oz early on but struggled to gain a foothold at these higher levels as prices close 0.44% lower towards $1,233.50/oz. Support at the 50 day MA around $1,230/oz remains untested for now as prices continue to find investment buyers just above. Gold prices have shed almost 6% since their mid-January peak around $1,307/oz as investors react to the move from global central banks calling for more stimulus measures which has seen a rebalancing of portfolios out of gold and into risk assets as market participants search for higher yields.

DXY holds on to recent gains

DXY Curncy DOLLAR INDEX SPOT 2015 02 11 07 13 32

EUR trades under pressure

EUR Curncy Euro Spot Daily 11 2015 02 11 07 13 19

Spot gold prices find firm support towards $1,230/oz

XAU Curncy Gold Spot Oz 2015 02 11 07 32 54

Events for today

JP Market Holiday  

1530

US

w/e

EIA Energy Stocks

1900

US

Jan

Fed Budget

Topics: Gold, ECB, EUR, DXY
More from: Kash Kamal