19, March 2013

EUR/USD (a 4-hour chart)

EUR/USD (a 4-hour chart)

The pair fell from Friday maximum to 1.2900. The reason is Cyprus. You might wonder how a small country like Cyprus caused the fall of the euro? Even scandal and chaos in the Italian Parliament did not cause so much noise and resonance.

MOODY'S have previously stated that the introduction of losses for investors, as part of aid to Cyprus, can affect the ratings of all European banks.

We do not believe that the European authorities will take this step and introduce losses for investors fearing that the situation could spread to the banking systems of other countries in the eurozone, which has the deficit as well.

On Saturday, the Eurogroup meeting approved a one-time tax of 9.9% on deposits with Cyprus banks. If parliament approves the law of Cyprus, the country will receive a loan of 10 billion euros, and the depositors will get bonds issued by banks in the amount of money withheld. Bond yields completely depend on the development of gas fields in the Cyprus offshore, which development will begin in 2020.

We expect the results of the Fed meeting by the end of the week. All forecasts seem to be optimistic.