adminpair as we saw a dismal jobs report last Friday influencing a rebound of the euro.
If the European Central Bank is going to go ahead with rate cuts, this will result in a weak euro, all because of the fact that pillar of strength will have been removed.
The single currency was little changed at US$1,2492 having rallied to US$1,25 supported by that negative effects of the jobs report on the dollar.
The euro rose by 0,7 percent against the yen to trade at 97,880 yen and advanced by 1 percent to the sterling pound to trade at 81,20 pence per euro.
With the EU leaders meeting this week, the ECB and the Federal Reserve Bank Testimony this week as well these could bring some major swings in the euro and the US dollar currency pair. We could see short positions in the euro-hit record high, as the market is already short euro given the market sentiments as the European debt crisis keeps dragging the markets down.
The market believes European Central Bank’s response is critical in this week’s meeting to at least bring relief on all eurobond holders.
The US growth concerns and the eurozone debt concerns continue to overshadow markets as this continues to put these economies in bearish mode.
In London, a downgrade in sovereign debt to AA- catapulted by a poor GDP and manufacturing data, which continues, to contract calling for another round of stimulus package.
The sterling pound weakened against the dollar to trade at US$1,5383 and further declined against euro by 1 percent to touch 81,20 pence per euro.
As in the case of last week the GBP/USD currency pair remains overstretched coming into this week’s trading sessions. It seems the global economy is entering a new danger zone amid Europe’s debt difficulties.
Looking at such issues in the eurozone, European investor confidence has fallen to its lowest level in more than two years.
With what’s happening on the markets it’s like pouring cold water on the markets with exchange rates swinging sideways, it’s really frustrating for investors.
Traders are now looking to sell and seek re-entry points especially in the currency markets and also areas of opportunity. In Australia, the dollar continues to trade under the shadow of the European debt crisis as well as Chinese data. The Australian dollar was little changed ahead of that Reserve Bank of Australia meeting
which could signal a possible rate cut to at least cool down inflationary pressures.
That announcement could see downward pressure being exerted on the Aussie dollar going forward as that could reduce the yield on their currency. The Aussie dollar touched US97,25 cents.
South African markets
The rand shed 0,4 percent against the dollar to trade at 8,4972 and we are likely to see rand trade in range-bound like trade.
The South African Reserve Bank has reiterated that South African banks are well capitalised bringing that investor confidence.
European debt crisis will have a negative impact on Sub-Saharan Africa than it will on Europe itself as demand on exports will slow pushing central banks in Africa to revise their growth rates.
Trade balances will likely shrink and we are more likely to see countries like South Africa among other emerging markets reduce their euro holdings to preserve their net reserves.
Zimbabwean markets
Zimbabwe’s trade balance is likely to shrink as demand for exports will weaken due to fatigue in Europe and China, and might need to reassess its growth forecast for 2012.
Zimbabwe needs to look for new frontiers to hedge its bets. On the Zimbabwe Stock Exchange the index is in a bearish mode leaving counters like BAT to name a few to be huge buys especially in a bearish market and such counters are considered income-generating stocks given their fundamentals and are possible buys in a market slump.
Dividend paying stocks and top-line revenue earners are investors’ best bet at the moment.
Commodity markets
Gold advanced on a dismal jobs report as fear gripped the markets on whether US economy will recover soon.
The bullion rose by 4 percent one of its biggest intra-day trade to trade at US$1 620,20 an ounce. Crude oil fell below US$90 per barrel trading at US$84,22 per barrel down 22 percent since the turn of the year.
That risk premium has faded as a weaker demand in crude oil has led to a flight to safety in the dollar due to economic woes.
Good day.
Contact Prodigy Chinanga on 0772753594
Online Reporter