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Forex Flash: The Troika is not the united front it previously was - BBH

FXstreet.com (Barcelona) - Marc Chandler, Global Head of Currency Strategy at Brown Brothers Harriman believes that the Troika is not the united front that it previously was.

He feels that the Cypriot crisis has brought this issue to the surface and many now share our insight. He notes that the The EC would seemingly be content for Europe to deal with the issue alone, which is easy enough after the IMF has generally assumed the funding of roughly a third of the aid packages. Further, he adds that Germany, which initially did not want to include the IMF, now see it as an ally. The ECB has shown itself to be willing to use the leverage it has (such as granting Emergency Lending Aid by the national central banks and definition of acceptable collateral) to pursue its interests.

Additionally, he notes that Germany and the IMF have long wanted to increase the private sector burden sharing when aid is needed. Brussels has been a reluctant party but Chandler notes that Berlin and the IMF are starting to win the fight. He highlights that there is an established order of seniority (in practice if not law) for cases of insolvency. He writes, “In Cyprus, the initial plan, proposed by the newly elected Cypriot President, and agreed to by the Troika and Germany, was a violation of this by taxing small depositors while equity investors and unsecured creditors were kept whole. However, the new plan exempts small depositors and hits shareholders, bondholders and uninsured depositors. European officials seem to have greater confidence increasing the role of the private sector aid programs.”

Forex: EUR/GBP peaks at 0.8498

The EUR/GBP has been slowly rising across the chart after a first touch at 0.8460 low. The cross has reached to 0.8498 high already, two pips away from the 0.8500 psychological level. The discussion over whether the Cyprus bailout is or not a template for future situations in the Eurozone has taken over the market. Some officials say “yes” and others deny it. Despite some jittery, the EUR/GBP is holding up at its highs.
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Forex Flash: AUD/JPY maintains 1-month target at 100.00 on BoJ – Westpac

Risks still seem firmly skewed to the downside in AUD/JPY multi-week though markets should at least wait to see what BoJ governor Kuroda will deliver at his first meeting. Indeed, “the 100 area is likely to remain difficult near-term while 97.00 provides support. Our one-month target however is 95-100, mostly driven by profit taking on long USD/JPY positions.” notes Sean Callow, a Global FX Strategist at Westpac.
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