Tag Archives: G-20 major economies

EU Institutions Hit By Major Cyber Attack

The European Commission and the External Action Service have been hit by a major cyber attack ahead of a key EU summit where crucial decisions on the future structure of the bloc, countries’ economic strategies and the ongoing war in Libya are to be discussed, according to news reports.

“We’re regularly hit by cyber attacks, but this one’s a big one.”

An internal email seen by the EUobserver.com and sent to all staff warned: “We have found evidence that both the commission and EEAS are the subject of an ongoing widespread cyber attack.”

The commission will not comment on the nature of the attacks due to security concerns, but has confirmed the institutions are indeed the focus of a serious strike.

Meanwhile officials are comparing the attack to an assault on the French finance ministry last year ahead of a G20 meeting.

“We’re regularly hit by cyber attacks, but this one’s a big one,” an EU source familiar with the matter that did not want to be named says.

The commission is currently attempting to assess the scale of the threat underway and in order to prevent the “disclosure of unauthorised information”, and has shut down external access to email and the institutions’ intranet.

All staff have been asked to change their passwords and to send sensitive information via secure email.

One EU source suggested the attack was similar to the massive assault which bombarded the French finance ministry last last year and was described by budget minister François Baroin as “spectacular”.

The authors of the attack had been particularly interested in files on the G20 summit held in Paris in February.

At the time, Patrick Pailloux, the head of France’s National Agency for Information Systems Security described the attack as “pure espionage … one of the most important attacks, if not the most important, ever to target the public administration.”

Some 150 computers were affected. French officials also suggested that some of the information was redirected to Chinese sites.

An EU source suggested that in this case too, China may be among the suspects.

“This is an important summit in many ways. There are people who want to know what the different positions are in what’s being discussed.”

In the attack on Brussels officials are publicly refusing to discuss the scale of the attack or its source.

“We are not speculating on the origin,” EU institutional affairs spokesman Anthony Gravali tells the EUobserver.com.

It is thought to be the first such attack on the External Action Service, although Gravali was keen to downplay this record.

“It’s difficult to say whether this is the first one. So much of the EAS is still technically DG Relex [the external relations department of the commission, the precursor of the EAS],” he says.

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The Fight Against Currency War

G20 pledges to avoid weakening currencies to boost exports and to let markets increasingly set foreign exchange values, after the weekend summit. The risk of a of currency war seems to have abated somewhat, and the USD is now at a 15-year low.

“The terms on currency policy are relatively vague and may be interpreted differently by each country. It remains to be seen whether actual practises will be changed.”

Camilla Viland

As expected, currencies were discussed at the G20 meeting over the weekend. The finance ministers of the group now pledges to avoid further weakening of currencies, to boost exports and to let markets increasingly set foreign exchange values. This could be interesting…

First of all; there was no decision on the US proposal for current account targets, and this debate will be continued at next months G20 meeting in Seoul.

And second; the terms on currency policy are relatively vague and may be interpreted differently by each country. It remains to be seen whether actual practises will be changed.

“However, it is very positive that they have come up with a joint statement on currencies,” analyst Camilla Viland at DnB NOR Markets writes in Monday’s Morning Report.

Previously this has been avoided in fear of alienating China, she points out.

USD At 15-Year Low

The USD weakened after the G20 meeting, as the risk of tensions in the currency market has abated, according to DnB NOR Markets.

Camilla Viland

“The dollar has, among others, weakened versus Asian currencies on the prospect nations in the region will refrain from intervening in foreign exchange markets,” Ms. Viland  writes.

Expectations of the Federal Reserve announcing another round of quantitative easing next week also helps in bringing the dollar down.

Another currency which has weakened over the weekend is the Swiss franc.

“The currency is normally seen as a safe haven in the currency market and the weakening may be a result of lower risk of a currency war,” the Norwegian analyst says.


Biggest Strauss Kahn Statement – Ever?

Dominique Strauss Kahn

The G20 financial leaders also decided that Europe will surrender two seats in the IMF’s executive board to emerging nations, like China, India and Brazil with the intent to give these countries more power.

IMF-chief Dominique Strauss Kahn said that this was the “biggest IMF reform ever.”

Yeah, right!

Mr. Strauss Kahn is about to get a reputation for distributing pompous – and not very well founded – statements.

See also: In The Brigh Minds Of IMF


German Economy Still Flying

The German IFO index rose from 106.8 in September to 107.6 in October.

German Economy Recover

This is the highest outcome since May 2007, and better than consensus’ estimate of 106.5 and the outcome signals solid growth for the locomotive of European economy.

However, it is worth noting that this month’s improvement was not only due to better current conditions, but also due to a rise in business expectations.

“The latest developments in the German economy have been positive. However, we do not expect this to last. Due to sluggish international growth and a strong euro, growth will abate going forward. Fiscal tightening will also weigh on German growth,” Camilla Viland at DnB NOR Markets writes.

And Now; The US Housing Market

From the US, figures for existing home sales in September will be released Monday.

The Pending home sales index, which is an indicator for actual home sales, has risen over the last two months.

Mr. Housing Market

And we may see a rise in existing home sales this month, too. (Consensus expects 4.3 million houses to have been sold in September, up from 4.1 million sales in August.)

“Such an outcome is positive. Nevertheless, the levels of monthly house sales are very low seen in a historical context,” Camilla Viland notes.

And yet to come; the impact of the foreclosure scandal…

Scandic Updates

Here in Scandinavia several important events are on the agenda this week.

In the Norwegian, Norges Bank‘s interest rate meeting and the release of a new monetary policy report, will probably get most attention.

“Both we and consensus expect the interest rate to be left on hold at this meeting,” Ms. Viland writes.

In fact, a survey by the financial news agency, TDN Finans, shows that out of 17 participating analysts, no one expects the Norwegian Central Bank to rise its key rate.

(But wouldn’t it be fun if governor Svein Gjedrem pulled one last stunt before he retires in December?)

Anyway – the central banks new interest rate path (a prediction of the key rate level going forward) will probably be the most interesting thing for Mr. Gjedrem & Co.

The interest path rate has been lowered a few times already this year, and the interest rate is currently set to be raised around New Year.

“Given the latest developments we do not see this as likely. Foreign swap rates have fallen markedly since the previous report was released in June and inflation has been lower than anticipated. This indicates that the interest rate path will be lowered,” DnB NOR Markets says.

Adding: “We expect that the new interest rate path will indicate that the next rate hike will not be until March or May 2011.”

Also the Swedish Riksbank meets this week, holding their monetary policy meeting on Tuesday.

“The Swedish economy has performed strongly lately and this is one reason why the Riksbank has raises rates by 50 bps since the bottom. The Riksbank has signalled that more is to come and both we and consensus expect them to raise the interest rate by 25 basis points, to 1.00%, at tomorrows meeting,” the Norwegian money market specialist says.

More from DnB NOR Markets:

OSE Share recommendations. 25 – 29 October 2010.

Weekly FX Update.

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Comments Off on The Fight Against Currency War

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Gold And Silver Hit By Correction

This week China raised its key interest rate and speculation about US quantitative easing and the wider implication left the front page, at least for a little while. The move initially stopped the dollar from weakening further with some commodities suffering setbacks as a consequence.

“It is during a correction phase that the underlying strength of a market will be tested and this is the situation we now have.”

Ole S. Hansen

Gold made its first proper weekly loss in almost three months while the energy sector continues to trade sideways to slightly lower, analyst Ole S. Hansen at Saxo Bank points out in his weekly summary of the commodity markets activity.

The Reuters Jefferies CRB index which tracks 19 leading commodities was flat on the week with big discrepancies between markets.

The whole agricultural space is still caught up in the weather related storm that has swept around the globe these past few months.

This has caused widespread disruption to production which in turn has seen agricultural commodities perform very strongly.

How strong can be seen on the below sector split from the Dow Jones UBS commodity index. The overall performance of the DJ-UBS index is showing a year to date increase of four percent which is primarily due to the weak performance of the index heavy energy sector which count for more than 30 percent of the total index.

We have seen the correlation between strong gold and weak dollar increase recently.

With the dollar finding some strength ahead of the G20 meeting in South Korea this weekend gold has come under some pressure resulting in the first weekly loss in 3 months.

It is during a correction phase that the underlying strength of a market will be tested and this is the situation we now have.

“The next couple of weeks could almost decide whether the 2010 high have been seen already or whether this correction will attract new buyers who have been holding back waiting for such an opportunity.”

As usual silver has underperforming during the correction just like it has been outperforming during the recent rally.

Support can be found down towards 22.18 and 21.34 which are Fibonacci retracement levels of the recent rally.

The equivalent retracement levels for gold can be found at 1300 and 1272 with trend line support at 1,311 also worth watching.

A move back above 1,350 could signal a resumption of the uptrend with the next major target being 1,400.

WTI crude oil continues to find itself entrenched in a relatively tight range between 80 and 85 dollars.

The Chinese rate hike during the week scuppered another attempt at breaking higher as dollar strength sent it looking for support.

The speculative long position held by money managers such as hedge funds rose to near record levels last week and this would be a cause for concern.

“A break below 80 dollars could trigger some long liquidation resulting in a deeper correction.”

A break below 80 dollars could trigger some long liquidation resulting in a deeper correction.

A failure however to reach a deal to quell the global currency unrest at the G20 meeting in South Korea could be seen as being supportive for oil and other commodities as the dollar risk resuming its recent decline.

Natural gas slumped another four percent this week as the weekly storage data from the US showed inventories continuing to rise at a faster pace than expected.

“With the pickup in winter demand not expecting to outweigh supply for another few week’s inventories could reach the record levels seen last year adding.”

This is adding to the oversupply worries that have kept prices under pressure for months and have led to the forty percent price drop year to date.

The long crude short natural gas ratio spread (WTI crude oil divided by natural gas) is a favoured value trade by many hedge funds and only a significant change in direction of this spread, which has seen crude outperform natural gas by 70 percent since June, could bring some support back to the beleaguered market.

Turning to the agricultural sector we saw strong performances from coffee with the price of Arabica coffee beans rising above 2 dollars per pound for the first time in 13 years.

This comes amid fears that adverse weather across key growing regions in South America will lead to further supply downgrades. Columbia, the second largest producer of Arabica, have already said that a fungus is damaging plants and may reduce the output for 2011.

Columbia had been expected to produce 10.5 million bags during the 2010/11 season but recent revisions have seen that reduced by ten percent.

Combined with reduced output from Brazil, the world’s largest grower, demand could outstrip demand over the next twelve months by 1.3 million bags according to analysts.

Having rallied strongly since June the two dollar level reached this week could provide some near term resistance but demand from roasters will probably keep it supported on a potential setback.

The price of rice has also continued to rally increasing the focus on this grain which is the stable diet for more than three billion people across Asia.

“The main harvest in Thailand may drop by 20 percent after the worst floods in four years hit the growing regions.”

This has resulted in the Thai export price, which is the benchmark for the Asian market, having rallied ten percent from the July low and could rally another ten percent before year end as rice importing nations steps in to meet their needs.

A food crisis like the one in 2008 is luckily still very unlikely with the Thai benchmark trading at half the level seen back then.

“Continued weather developments have to be watched carefully as actual supply worries more than speculative interest have been driven these markets recently.”

Ole S. Hansen


The January rough rice futures contract traded in Chicago reached 14.59 dollar per hundredweight this week and with seasonal demand picking up some analysts forecasting additional price rises towards the sixteen dollar level seen last year in December.

Analysis by futures and fixed income manager, Ole S. Hansen, at Saxo Bank.

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