Daily Market Review 19 of October
OVERVIEW

The European officials apparently are doing quite well in terms of reducing collateral risks. More over they are able to do that without wasting a penny. But still the conflict of interests of debtors and creditors remains and exacerbates. Most of all it manifests at the example with Greece. The officials on different levels including German leaders are already not trying to expel the country from the monetary union. The IMF insists on giving them more time. Creditors with Germany as a leader are not just making concessions. The German minister of finance made a counter-offer. Most likely Greece will receive its aid in the end of the month, otherwise there will be an inevitable default, that will affect first of all the official creditors and then the private sector. Shauble proposes to open a deposit account and to fill it with the sum of the tranche. The money will be used only for service of the debt. It won’t help Greece to lower the pressure related to lowering expenditures or increasing taxes. The advantages of the proposition are that the inner problems of the country will be isolated and their destabilizing influence on Europe will be minimized. Also the reaction of the market on whether Greece will get a tranche or not will also decrease. Of course it is quite easy for the IMF to demand the participation of the private sector in restructuring of the Greece debt as the fund had already protected itself from any related losses.

CURRENCIES

EUR/USD

Yesterday Euro depreciated against the US Dollar from 1.3128 to 1.3055. The other rise of the interest to risky assets helped the currency pair to push away from the old lower boundary in the area of 1.2900 and to get close to 1.3140. But further up it hasn’t moved because the investors are already not sure whether they want to buy Euro without knowing the results of the summit. And the dip to 1.3055 confirms that.



GBP/USD

Yesterday the Pound depreciated from 1.6170 to 6039 with further bounce to 1.6062. Analysts recommend paying attention to the fact that though buyers don’t lose optimism, the attempts to withhold above an important level of resistance looked unconvincing. In this connection the loss of the    1.6000 level will most likely lead to the further development of downward trends with a soft landing at 1.5850.