[FBS_Official]

Pimco: Portugal won’t be able to withstand on its own

Analysts at Pacific Investment Management Co., the world’s biggest bond fund, claim that the increase in the ECB interest rates and the resulting stronger euro will have a very negative impact on Greece, Ireland and Portugal.

The specialists claim that although the European Central bank has to make decisions for the euro area as a whole, it should probably consider the possibility of hiking rates for the strong countries while conducting more loose policy for the weakest peripheral countries.

According to Pimco, the best thing to do for the European monetary authorities is to acknowledge the fact that Greece, Ireland and Portugal face significant solvency challenges and some or all of them will need to restructure their sovereign and sovereign-guaranteed debt. The strategists point out that Greece’s second review of its program with the International Monetary Fund showed that the program is not working.

As for Portugal, Pimco thinks that the resign of the national government last month has only put off the inevitable apply for the bailout.

Analysts at Commerzbank share this point of view claiming that as the Portugal 5-year bond yields are still at 9.9%, it’s only a matter of time until the country has to ask for help. In their view, the outcome of today’s 6-month and 12-month bill auctions doesn’t matter as Portugal won’t be able to deal with its problems on its own.

[FBS_Official]

Barclays Capital: yen will lose to euro and dollar

Technical analysts at Barclays Capital believe that the pair EUR/JPY is getting ready to reverse its downtrend that was holding since 2008. In their view, if the single currency breaks above 122.30, it will get chance to advance to 127.95. If euro closed the week above the top of the Ichimoku Cloud at 121.95, the bulls will become strong enough to push the rate higher to 139.00 later in 2011.

[FBS_Official]

Rabobank, Commerzbank: comments on EUR/GBP

British pound weakened today versus the European currency as the UK industrial production contracted in February by 1.2% from the previous month’s level, while the economists were looking forward to 0.4% advance. The pair EUR/GBP returned to the trend line support at 0.8775.

Analysts at Rabobank International think that such data means that the country’s economy is still too weak Bank of England won’t lift up interest rates until November. The rate hasn’t changed since March 2009. Bloomberg survey shows that the central bank will likely keep the rates unchanged at its tomorrow meeting.

Strategists at Commerzbank, on the other hand, claim that the BoE will finally tighten its monetary policy and some more hawkish comments from Britain’s monetary authorities will help pound. According to the bank, sterling will strengthen to 83 pence per euro and trade at $1.60 by the end of the year. The median forecast of the economists surveyed by Bloomberg News is that the pair EUR/GBP will end the year at the 84 pence level.

[FBS_Official]

Canadian dollar renewed maximum versus the greenback

Canadian dollar rose to the more than 3-year maximum versus its US counterpart in the 0.9590 area.

Loonie was helped by the growth of the global equities that encouraged the demand for higher-yielding currencies. Strategists at Canadian Imperial Bank of Commerce believe that loonie’s strength is caused mainly by the weakness of US dollar due to the nation’s fiscal problems. In addition, the interest rate differential is in favor of Canadian dollar.

Technical analysts at Commerzbank note that the pair USD/CAD has breached the support line from October to April at 0.9607 and is now poised for a decline to 0.9577 and then to the psychologically-important 0.95 region. The specialists say that they will maintain the negative outlook for the greenback as long as it’s trading below the 55-day moving average at 0.9832.

[FBS_Official]

Portugal has finally asked EU for help

Portugal’s Prime Minister Jose Socrates announced yesterday evening in a televised statement that the country will apply to the European Commission for bailout, reports Bloomberg.

Socrates underlined that it’s not possible anymore to put off asking for help as the nation’s political crisis pushed borrowing costs to record levels. Socrates who leads the Socialist Party offered to resign on March 23 after parliament rejected proposed budget cuts, leaving him in charge of a caretaker government with limited powers until a June 5 election.

According to the information from the unidentified source, Portugal is aiming for a package that may be worth as much as 75 billion euro ($107 billion). Specialists at Credit Agricole say that Portugal may initially ask for a bridging loan to support its finances until a new government has been formed, while the full package will be delivered only after the elections.

Analysts at UBS note that the fact that Portugal will seek for bailout didn’t surprise the markets at all as they have long ago priced in such outcome. Economists at UniCredit also don’t think that Portugal’s announcement will provoke a new wave of the European crisis.

Portuguese government bonds due March 2012 were sold yesterday at an average yield of 5.902%. That’s more than Germany pays for 30-year bonds. The yield on Portugal’s 10-year government bond rose to a high of 8.80% this week. The premium that investors demand to hold Portuguese debt over German bunds reached the maximal level since euro was launched of 544 basis points on April 5.

[FBS_Official]

Commerzbank: comments on EUR/USD

The single currency climbed from last week’s minimum at 1.4020 to the 15-month maximums in the 1.4350 area breaking above the 3-year downtrend.

Technical analysts at Commerzbank think that although the RSI indicator has not confirmed the maximum the momentum for the pair EUR/USD will remain bullish as long as it’s trading above 1.4137. The break higher will be confirmed if euro closes the week above 1.4269/83.

According to the bank, resistance levels are now found at 1.4425 (long-term double Fibonacci retracement) and 1.4535 (1995 maximum).

[FBS_Official]

Barclays Capital: comments on EUR/CHF

Technical analysts at Barclays Capital claim that the single currency has to close the day above the 1.3205 level versus Swiss franc that represents neckline of the “double bottom” formation in order to get chance to rise to 1.38/40.

As for the near-term trade, the outlook for the pair EUR/CHF will remain bullish as long as it’s trading above 1.3040. As a result, the specialists recommend buying euro on dips.

[FBS_Official]

US government may shut down tomorrow

US government shutdown on Friday seems to be more and more likely. It will happen if the American lawmakers fail to come to an agreement on how to finance the government as the Federal budget for the current fiscal year that began on October 1, 2010, hasn’t been adopted yet.

Strategists at Bank of America Merrill Lynch aren’t very concerned about the matter claiming that US sovereign debt rating and the greenback won’t be affected much in case of the temporary shutdown.

In 1995 such happened already twice. The first time, the dollar was little moved versus euro or yen, while the second time that took place a month later, US currency actually rose against yen.

It’s necessary to remember that a much more important deadline is looming for the US government and investors should focus their attention on the outcome of the debate on raising the debt ceiling. Strategists at Citigroup note that it’s possible to shut down the government without defaulting, but the real default would lead to terrible consequences for the greenback.

Anyway, the bank says there are few reasons to be long for the greenback unless some global catastrophe makes investors rush to safe havens. According to Citigroup, dollar’s accounting for about two-thirds of global reserves, so the supply exceeds demand and investors will seek opportunities to sell the currency.