logo
  Join        Login             Stock Quote

EURIBOR, Euro & USD Index

 August 04, 2010 11:12 AM


Many have expressed skepticism with strength of the euro at a time when EURIBOR and EUR-Libor rates remained on the rise. EUR 3-month LIBOR stands at 12-month high of 0.83%, up 46% from its March lows. Yet unlike in April-May when rising Eurozone rates resulted from plummeting inter-bank confidence and falling liquidity in the system, the recent strengthening in Eurozone interbank rates has been partly boosted by improved macroeconomic/bank earnings figures, as well as a stabilizing currency.

Rising EURIBOR and EUR 3-month LIBOR are primarily negative for the euro at times when eroding interbank confidence leads to a shortage of US dollars in the global monetary system, to the extent of boosting USD-denominated LIBOR. But thats not been the case over the past 6 weeks. While EUR 3-month libor has risen by more than 20-bps since the peak of the sovereign crisis in early June, USD 3-month LIBOR fell by nearly 15-bps during the same period. Weak US data, FOMC economic downgrades and broadening Fed dovishness have accelerated the decline in USD-libor. Consequently, the chart below shows the EUR-USD 3-month libor spread (EUR minus USD as indicated by red graph) to have risen to its highest level since January, closely followed by a rising euro.

[Related -Apple Inc. (AAPL) Q2 Earnings Preview: Trending Towards an Iceberg?]

Just Like in October 2009

[Related -Barrick Gold Corporation (USA) (ABX): Goldman Says to Bet on $21]

The steepness of the EUR-USD libor spread is instrumental in boosting EURUSD, in a manner that is highly similar to Q3-Q4 2009 (left circle) when USD-libor fell below its Japanese counterpart for the first time.That was the time when markets allowed for the possibility of fresh QE in the US. As is the case today, the Federal Reserve was the only major central bank most likely to add on to its existing asset purchases, while the BoE had ended its QE program and the ECB standing pat. The result was a broad decline in the US dollar, coupled with rising equities and soaring energy and metal prices.

A 200-day MA unlike any other

The US dollars decline made the headline today when the USD index hit 80.59, falling below its 200-day moving average for the first time since late January. The importance of such a decline will only be highlighted once the break of the 200-day MA lasts into mid-month. But theres something notable about todays development. It is the first time in the life of the euro that the USD index breaks below its 200-day MA, without EURUSD breaking above its own 200-day MA. The chart below shows EURUSD stands at $1.3230, which is about 3 cents below its 200-day MA.


Next Page >>12
iOnTheMarket Premium
Advertisement

Advertisement


Comments Closed


rss feed

Latest Stories

article imageSolarCity Corp (SCTY): Baird Says Buy the Dip

SolarCity Corp (NASDAQ:SCTY) is a darker shade of green than most today. The alternative energy company I read on...

article imageSelect Comfort Corp. (SCSS) Q1 Earnings Preview: Bear Vs. Bullish Surprise Rests on Margins

Select Comfort Corp. (NASDAQ:SCSS) will release results for the first quarter ended Mar. 29, 2014, after read on...

article imageAdvanced Micro Devices, Inc. (AMD) Q1 Earnings Preview: April Fools’ Gold

Advanced Micro Devices, Inc. (NYSE:AMD) will webcast its quarterly earnings conference call on Thursday, read on...

article imageCAMAC Energy Inc (CAK): A Shoebox Oil Stock With Insider Buying

Boardroom buyers fell to a monthly low based on the number of companies with purchase records. Only 60 read on...

Advertisement
Popular Articles

Advertisement
Daily Sector Scan
Partner Center



Fundamental data is provided by Zacks Investment Research, and Commentary, news and Press Releases provided by YellowBrix and Quotemedia.
All information provided "as is" for informational purposes only, not intended for trading purposes or advice. iStockAnalyst.com is not an investment adviser and does not provide, endorse or review any information or data contained herein.
The blog articles are opinions by respective blogger. By using this site you are agreeing to terms and conditions posted on respective bloggers' website.
The postings/comments on the site may or may not be from reliable sources. Neither iStockAnalyst nor any of its independent providers is liable for any informational errors, incompleteness, or delays, or for any actions taken in reliance on information contained herein. You are solely responsible for the investment decisions made by you and the consequences resulting therefrom. By accessing the iStockAnalyst.com site, you agree not to redistribute the information found therein.
The sector scan is based on 15-30 minutes delayed data. The Pattern scan is based on EOD data.