European Parliament disapproves of the way Cyprus bailout was handled

FXstreet.com (Barcelona) - The European Parliament held a session on the handling of the Cyprus rescue on Wednesday morning. The Eurogroup was heavily criticized for forcing losses on savers and for its “appalling communication” during the bailout negotiations.

EU Commissioner for Economic and Monetary Affairs Olli Rehn explained that a more gradual adjustment was not possible as the EU’s contribution to the bailout amounted just to 10 billion euros. He assured that “the support program will enable Cyprus to restore the health of the economy and to create a more sustainable economic model.”

The MEPs however attacked EU’s lack of proper monitoring of the Cypriot banking system, which allowed it for building up too much risk; they also found unacceptable that Cyprus was forced to implement measures which would not be required from larger EU Member States.

The MEPs demanded an explanation of the Troika’s decision-making process. Some suggested alternative solutions for Cyprus, such as reuniting the island to boost growth or proceeding with its exit from the euro.

Apr 17, 2013

Forex Flash: Margin traders return to being contrarian - Nomura

Nomura strategist Yujiro Goto notes that Japanese margin traders have maintained relatively high JPY selling positions, while JPY has been depreciating against the major currencies.

Forex Flash: Three misconceptions of short-term orientation of investors – JP Morgan

JP Morgan analysts caution against the exclusively short-term orientation that many investors show, as even themselves have had to shift focus more to the medium term, “and this keeps us solidly overweight equities against fixed income, concentrated in the US and Japan”. The argument points to three misconceptions. First, that it is often argued that to de-risk a portfolio, one should hold more bonds, as they have much lower volatility than equities: “We contend this is true over the short term, but much less so over the long term, as much of equity volatility is noise that disappears over holding periods of 3 years and more”, wrote analyst Jan Loeys, adding that “bonds are nominal assets that move with inflation which is not a stationary process. Over periods of more than 10 years, we note that US equities do not show that much more volatility than Treasuries”. Also, risk should be seen as the probability that you fail your objectives. Having said that, “pension funds that are underfunded would maximize the chance that they fail their liabilities if they invest largely in low-yielding fixed income. With equities, they would at least have a fighting chance”.