$Euro Finds Renewed Bids; Resistance Eyed by Previous Weekly High

Correlated active risk find renewed plans German to strengthen Spanish banks inspire confidence Draghi ECB says that the Central Bank is ready to act if necessary following key resistance of EUR/USD intervenes by decision of rate of the Bank of England 1.2625 due later today. services PMIs solid risk correlated active were very well bid over the few last sessions, with currency and actions significantly reverse the market players are able to let go of the worst of their fears for the moment. The doom feeling who had taken the previous week disappeared and investors are once again warming up to the idea that the euro area can escape to the current crisis and to avoid the debacle. News that the Germany is to develop plans strengthen Spanish banks without waiting for more reforms or any formal aid agreement was seen as a huge positive and it was once the primary drivers of risk of trade.
Relative performance against the USD Thursday (from 9: 25GMT)
AUD + 0.25 %
NZD + 0.13 %
CAD + 0.08 %
GBP + 0.01 %
EUR-0.03 %
CHF-0,05 %
JPY-0.30 %
Although the European Central Bank, the political left on as has been planned, the comments of the President of the ECB Draghi head that the Central Bank is ready to act if necessary have also helps enhance the feeling, while some well received Thursday EZ auction results were not bad. The Euro now eyes a retest and breaking the previous high weekly 1.2625, while the Yen has also offered very well on the liquidation of parts of refuge. Yet, at the end of the day, it's a market that desperately need on technical correction some intense risk-off moves, and at this stage, we would attribute the recent action of basic price of the "technicals".
European leadership will really need to dig and to come with some serious plans resurrect the area to be any hope of sustainable recovery Euro. Until then, the strategy should be to sell these gatherings of currency in the additional force. In the future, the Bank of England is scheduled for a rate decision later. While no change in policy is expected, there is much speculation that the Bank of England will move to a more dovish stance on the continuous pressure of world macroeconomics. Earlier, UK services PMIS came in better than expected and has helped support the pound sterling.
ECONOMIC CALENDAR

TECHNICAL OUTLOOK



EUR/USD: the market is in train to correct certain levels severely oversold after breakdown of yearly lows little less 1.2300. While our global perspective is clearly downward, by we see still place upside in the short term before a high low is wanted. Locate the last daily close back above 1.2545 to open the door for an acceleration in the region of 1 2800 - 1 3000, where new offers are likely to re-emerge.

USD/JPY: the recent setbacks have been quite intense, the market collapse by the ADM, 200 days before finally finding support by 77.65. We have since seen attempts at recovery and we support that the market should continue to break higher, with views finally fixed on a retest and rupture of 2012 senior by UST up more. However, at this stage, we need to see a break and close above 80.00 back to alleviate the pressures weighing officially and to reaffirm the optimistic prospects.

GBP/USD: Daily studies are now well saturated and risk CIHI appear inclined backwards to allow a corrective bounce short term necessary after the setback down just shy of the 2012 bottom of January. Locate the last close back daily over 1.5440 to strengthen the prospects for growth in the short term, in the region of 1 5600 - 1 5800, where a low high costs will be sought for that underpin the acceleration of bear resumption of the trend.
USD/CHF: while we retain a broader upward perspective for this pair, with the market seen to establish above parity in the weeks to come, short-term risks are a corrective withdrawal to allow the market to establish a fresh plu bass. Thus, we see risks of weakness in the next sessions to the 0 9300 - 0 9500 area before the market seeks to reaffirm its upward momentum and broader uptrend.

Euro Finds Renewed Bids goal Price Action Still Classified as Corrective

AppId is over the quota
AppId is over the quota
Risk correlated assets finding renewed bids German plans to strengthen Spanish banks inspire confidence ECB Draghi says the central bank is ready to act if necessary EUR/USD next key resistance comes in by 1.2625 Bank of England rate decision due later today Risk correlated assets have been very well bid over the past few sessions, with currencies and equities reversing sharply as market participants are able to let go of the worst of their fears for the time being. The doom and gloom sentiment that had taken hold in the previous week has faded and investors are once again warming up to the idea that the Eurozone may be able to escape the current crisis and avoid breakup. News that Germany is drafting plans to strengthen the Spanish banks without expecting further reforms or any formal aid deal has been seen as a huge positive and this has been once of the primary drivers of this latest risk-on trade.

Although the European Central Bank left policy on hold as was expected, comments from ECB President Draghi that the central bank is willing to act if necessary have also been helping to bolster sentiment. The Euro now eyes a retest and break of the previous weekly high by 1.2625, while the Yen has also been very well offered on the liquidation of safe haven plays. Still, at the end of the day, this is a market that had been in desperate need of technical correction following some intense risk-off moves, and at this point, we would attribute the recent price action more to the technicals than fundamentals.

European leadership will really need to dig in and come up with some serious plans to resuscitate the region for there to be any hope of a sustained Euro recovery. Until then, the strategy should be to look to sell these currency rallies into additional strength. Looking ahead, the Bank of England is slated for a rate decision later today. While no policy change is expected, there is a good deal of speculation that the Bank of England will shift to a more dovish stance in light of the ongoing pressures in the global macro economy.

ECONOMIC CALENDAR

TECHNICAL OUTLOOK

EUR/USD:The market is in the process of correcting from some violently oversold levels after breaking to yearly lows just under 1.2300. While our overall outlook remains grossly bearish, from here we still see room for short-term upside before a fresh lower top is sought out. Look for the latest daily close back above 1.2545 to open the door for acceleration into the 1.2800-1.3000 area, where fresh offers are likely to re-emerge.

USD/JPY:The latest setbacks have been rather intense, with the market collapsing through the 200-Day SMA before finally finding support by 77.65. We have since seen attempts at recovery and we contend that the market should continue to break higher, with sights ultimately set on a retest and break of the 2012 highs by 84.20 further up. However, at this point, we will need to see a break and close back above 80.00 to officially alleviate downside pressures and reaffirm bullish outlook.

GBP/USD: Daily studies are now well oversold and from here risks seem tilted to the upside to allow for a necessary short-term corrective bounce after setbacks stalled just shy of the 2012 lows from January. Look for the latest daily close back above 1.5440 to strengthen short-term bullish outlook, with acceleration projected into the 1.5600-1.5800 area where a fresh lower top will be sought out in favor of underlying bear trend resumption.

USD/CHF: While we retain a broader bullish outlook for this pair, with the market seen establishing back above parity over the coming weeks, shorter-term risks are for more of a corrective pullback to allow for the market to establish a fresh higher low. As such, we see risks for weakness over the coming sessions towards the 0.9300-0.9500 area before the market looks to reassert its bullish momentum and broader uptrend.

--- Written by Joel Kruger, Technical Currency Strategist

To contact Joel Kruger, email jskruger@dailyfx.com. Follow me on Twitter @JoelKruger

To be added to Joel Kruger’s distribution list, send an email with subject line “Distribution List” to jskruger@dailyfx.com

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$ Australian Dollar Surges, Euro Finds Bids Following ECB Press Conference

Fundamental Headlines
- US Productivity Fell 0.9% in First Quarter as Growth Cooled – Bloomberg
- US Stock Futures Pare Gain as ECB Sees Increased Risks – Bloomberg
- Assad Names New PM, Army Pounds Rebels – Reuters
- Euro Gains Amid Expectations for ECB Easing – WSJ
- Fed Considers More Action amid New Recovery Doubts – WSJ
Asian/European Session Summary
Risk-appetite was firmly positive in the overnight sessions, with the majority of gains by higher yielding currencies and risk-correlated assets coming in the early part of the Asian session. On one hand, comments by perma-dove and President of the Federal Reserve Bank of Chicago suggesting that the Fed was considering more easing stoked investors to shed their US Dollars and move into high beta assets, such as the Australian and New Zealand Dollars. Similarly, rumors emerged that China was considering another massive fiscal stimulus package to help spur slowing domestic demand. On the other hand, strong growth data out of Australia – perhaps the globe’s bellwether for commodity demand – suggested that concerns over a global slowdown may be overstated.
However, the European Central Bank rate decision and ensuing press conference today took the air out of the risk-appetite – if only momentarily. With rates on hold at 1.00 percent, the Euro sold off across the board with little new evidence of help coming from the ECB. By the end of President Mario Draghi’s press conference, however, the Euro had surged, suggesting that may the ECB may be altering its stance, if ever so slightly. So what did President Draghi say that prompted the rally?
Overall, it’s difficult to say that President Draghi was optimistic. He noted that “Euro-area growth remains weak” and that the “economic outlook is subject to downside risks.” He also said that “market tensions, unemployment [will] weigh on [the Euro-area] economy.” While these may be the prevailing facts, hope seems to be what’s driving trading activity. President Draghi’s two key comments – that the ECB is watching data closely and is prepared to act, and that a few council members called for a rate cut today – suggest that another round of easing or at least some new stimuli efforts will be set forth as spurred the risk-on rally. Thus, while the EURUSD dipped nearly 0.3 percent during the presser, it’s of little surprise that the pair rebounded from just below 1.2450 to back above 1.2510.
Taking a look at credit, European bonds have responded favorable, especially after the comments that suggested help could be on the way and the policymakers are becoming more open to a rate cut. Most notably, on the shorter-end of the yield curve, the Italian and Spanish 2-year notes have improved, with their respective yields falling to 3.805 percent and 4.472 percent. The German 2-year Schatz yield has risen, suggesting that risk-appetite is firm, climbing back to 0.045 percent.
EURUSD 5-min Chart: June 5, 2012

Charts Created using Marketscope – Prepared by Christopher Vecchio
The Australian Dollar has been the top performer today following the explosive 1Q GDP reading, with the AUDUSD appreciating by 1.43 percent. The New Zealand Dollar is also firmly stronger, up 1.16 percent against the US Dollar. The Euro is slightly higher as well, up 0.39 percent. The Japanese Yen remains weak, with the USDJPY having shed 0.46 percent thus far on Wednesday.
24-Hour Price Action

Key Levels: 14:15 GMT


Thus far, on Wednesday, the Dow Jones FXCM Dollar Index (Ticker: USDOLLAR) is trading lower, at 10198.58 at the time this report was written, after opening at 10245.13. The index has traded mostly lower, with the high at 10249.57 and the low at 10191.48.

$ US Dollar Finds Support in Haven Demand as Stock Markets Slump

US Dollar wrinkles Haven Demand Higher as Stocks Slump in Asian Trade Soft Eurozone PPI Print May Pressure Euro on ECB Policy Easing Bets Markets Highly Sensitive to QE3 Cues with US Factory Orders on Tap The US Dollar (ticker: USDollar) advanced overnight as Asian stocks declined, boosting demand for the go - to haven currency. The MSCI Asia Pacific regional benchmark equity index fell 2.2 percent, with markets reacting to Friday's deeply disappointing US employment report. The US is a crucial market for Asian exporters and the sub - by jobs growth reading weighed on future demand and earnings expectations. China's Non-Manufacturing PMI reading released over the weekend compounded selling pressure, showing service-sector activity slowed to the weakest in at least 14 months. The stock-linked Australian and New Zealand Dollars boron the brunt of the selloff in the FX space.
Looking ahead, S & P 500 stock index future are pointing sharply lower, hinting at continued risk aversion that stands to keep the greenback well-supported against most of its leading counterparts. Eurozone PPI figures headline the economic calendar, with expectations calling for wholesale inflation to print at 25-month low of 2.7 percent. The outcome may compound downward pressure on the Euro ahead of Wednesday's ECB policy meeting amid speculation that slumping growth and easing price pressure in the pipeline may allow Mario Draghi and company to boost stimulus efforts.
Later in the day, the spotlight shifts to US Factory Orders figures. Economists' forecasts point to an increase of 0.2 percent in April following a sharp 1.9 percent decline in March. A print in line with expectations is unlikely to prove particularly market-moving in that it would do little to disrupt the overall down trend carved out over the past two years. A disappointing outcome may spark some fireworks however considering markets' likely sensitivity to soft US data releases in the context of QE3 speculation. This means a particularly soft print may see the greenback pressured, particularly against the Japanese Yen and gold.
Asia Session: What Happened
China Non-manufacturing PMI (MAY)
TD Securities Inflation (MoM) (MAY)
TD Securities Inflation (YoY) (MAY)
Company Operating Profit (QoQ) (1Q)
ANZ Job Advertisements (MoM) (MAY)
Euro Session: What to Expect
Euro-Zone Sentix Investor Confidence (JUN)
Euro-Zone Producer Price Index (MoM) (APR)
Euro-Zone Producer Price Index (YoY) (APR)
France to Sell 84-357 Day Bills
Critical Levels

TradeTheNews.com European Market Update: Risk appetite finds numerous factors to feast upon in session; Greek PSI results set for release on Friday at 0600 GMT

Thursday, March 08, 2012 5:45:25 AM TradeTheNews.com European Market Update: Risk appetite finds numerous factors to feast upon in session; Greek PSI results set for release on Friday at 0600 GMT***Economic Data***

- (JP) Feb Preliminary Machine Tool Orders -8.6% v -6.9% prior
- (FR) France Q1 Final Non-Farm Payrolls Q/Q: -0.1% v -0.2%e v -0.2% prelim
- (FR) Bank of France Feb Business Sentiment: 95 v 96e
- (FR) France Jan Trade Balance: -€5.3B v -€5.2Be
- (CZ) Czech Feb Unemployment Rate: 9.2% v 9.1%e
- (CZ) Czech Jan Trade Balance (CZK): 29.6B v 22.0Be
- (TR) Turkey Jan Industrial Production WDA M/M: -3.1% v +2.5% prior; Y/Y: -1.3% v +3.8% prior; Industrial Production NSA Y/Y: 1.5% v 3.5%e
- (CH) Swiss Feb CPI M/M: 0l.3% v 0.2%e; -0.9%e v -1.0% prior
- (CH) Swiss Feb CPI EU Harmonized M/M: 0.1% v 0.1%e; Y/Y: -1.2% v -0.7%e
- (NL) Netherlands Feb CPI M/M: -0.8% v 0.7%e; Y/Y: 2.5% v 2.4%e
- (NL) Netherlands Feb CPI EU Harmonized M/M:1.0% v 0.9%; Y/Y: 2.9% v 2.8%e
- (SE) Sweden Jan Average House Prices (SEK): 2.322M v 2.078M prior
- (IC) Iceland Q4 GDP Q/Q: 1.9% v 4.4% prior; Y/Y: 2.7 v 3.8% prior
- (GR) Greece Dec Unemployment Rate: 21.0% v 20.9% prior (record)
- (ZA) South Africa Q1 BER Business Confidence: 52.0 v 38.0 prior
Fixed Income: - (HU) Hungary Debt Agency (AKK) sold Total HUF49B vs. HUF40B indicated in 2015, 2017 and 2022 Bonds
*** SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM ***
***Notes/Observations***
- Brazil Central Bank cuts rate by 75bps to 9.75% (more than expected)
- Rumors that PBoC could cut RRR and/or widen its currency trading band
- Australia Unemployment data softer than expectations
- Japanese current account hits record deficit
- Greek PSI participation deadline later today; EU official remain optimistic on the take-up; Results set for release on Friday at 0600GMT
- No surprises expected at BOE and ECB monetary policy meetings
Equities: FTSE 100 +1.1% at 5853, DAX +1.6% at 6780, CAC-40 +1.7% at 3449, IBEX-35 +1% at 8236, FTSE MIB +1.1% at 16,572, SMI +0.40% at 6129
- European shares rose ahead of Greek debt-swap deadline as rumors were rampant on the market that Greek PSI acceptance is high. ECB is also expected to announce its interest rate decision today expected to be unchanged at 1.0%. Economists expect bank to raise the inflation forecast above the 2% price-stability threshold which would limit further rate cutting. US economic data, namely the initial jobless claims, are also expected during NY morning.
- EADS [EAD.FR] was up following its strong quarter. Deutsche Post [DPW.DE] also rose following its results. Company also raised its dividend and predicted further growth in 2012 revenue. Air France [AF.FR] reported a wider loss than expected, even though revenues came in stronger. Company noted that H1 would be below previous year results due to a rising fuel bill and that FY12 remained uncertain
Speakers: - Greece gov't said to announce PSI results Friday, March 9th at 01:00 ET (06:00 GMT)
- German Econ Advisor Bofinger commented that the Greek debt swaps would go through but the country's debt burden would remain huge. He stressed that Greece needed to rethink its strategy and implement a real debt relief plan over the next year
- Former ECB member Stark commented in the German press that the quality of ECB balance sheet was alarming Stark noted that the Eurosystem's balance sheet was not only gigantic in its dimension but also alarming in its quality. He added that the structure of the balance sheet was a cause for concern because increasingly short-term debt claims were being replaced by long-term ones and this would make it more difficult for the bank to reverse its loose monetary policy
- Spain regions said to be unable to meet deficit target (This would contradict weekend press that all 17 regions would target budget deficits of 1.5% of GDP.
- SNB's Jordan commented that diversifying its currency portfolio was an ongoing debate but had yet to look at South Korean or Russian currencies at this time
- Hungary IMF representative Fellegi commented that the Govt sought an EU/IMF agreement asap and stresses that it had no "plan B'. The EU/IMF discussions were closely linked to infringement and it would discuss central bank law when it met the IMF in Washington DC next week. He added that Hungary had not received formal prerequisites of EU/IMF talks and that it would need such written prerequisite. Lastly he commented that Hungary would make the legislative changes needed for EU/IMF
- JP Morgan was said to submit proposal to China Advisory Group to promote CNY currency overseas use. JPM proposed that CNY be used for European Investment Bank (EIB) investment and debt offering
- S&P commented on China and saw increasing risks for developers with a negative rating action on Chinese developers likely to rise over the next 6 months.
- UN Food & Agricultural Organization (FAO) reports Feb Food Price Index at 215.3 v 212.8 prior. The FAO lowered its 2012 world wheat production to 690M tons from 700M tons prior
Currencies:
- Risk appetite was switching into a higher gear throughout the European morning. The focus remained on the Greek PSI and also on the ECB monthly press conference.
- There were numerous factors attributed to the jubilant sentiment and this paved the way for a weaker USD and JPY currency against the European pairs. There was market chatter circulating of a higher PSI acceptance level after reports surfaced that the debt swap results would be released on Friday, March 9th at 06:00 GMT. Earlier today there were rumors of a potential China PBoC RRR cut and lastly a press report from Wed that the Fed officials was said to be considering a sterilization option for potential future bond purchases was getting further circulation this session.
- Risk appetite had momentum coming into the session after various EU officials suggested sufficient support for Greece PSI and the country would to be able to enforce CAC (collective action clauses).
- The ECB press conference was likely to have Draghi throw the ball back to EU govts for reforms after the central bank performed the second 3-year LTRO operation last month.
- The EUR/USD was holding above the 1.32 level as the NY morning approached while EUR/JPY cross tested 107.60
Political/ In the Papers:
- The ECB's Mersch was said to be the one favored to replace Gonzalez-Paramo. The press article noted that Mersch is backed by Germany, France and other members that include Finland, Austria and Netherlands. Naming Mersch to the post would mean supporting criticism voiced by Bundesbank's chief Jens Weidmann. He has stated the ECB very carelessly handed hundreds of billions of euros to ailing nations while accepting dubious guarantees in return.
- Following reports from the 6th of March that Spain had reached an agreement with its regions on budget cuts, Spain press circulated reports that the regions cannot meet the deficit targets.
- The Telegraph analyzes the private sector holders of Greece's debt. Of the estimated €206B in debt, hedge funds and retail investors may hold about €54B, Greek banks €42B, Greek social security funds €20B, other Greek domestic accounts €10B, other European banks €30B, European insurers €10B, other European institutions €15B, other overseas and miscellaneous holders €25B.
- Volumes in foreign currency trading declined to six-year lows, as investors have become increasingly nervous from trading the euro, and central banks continued to maintain a hold on the value of their currencies - FT
- The Irish statistics department announced that employment increased by 10,000 in Q4 of last year for the time since 2007 although the average employment level for the entire year was approximately 38,100 lower year-on-year.
***Looking Ahead***
- (IS) Israel Q4 Preliminary GDP Annualized: No est v 3.2% prior
- 6:00 (CL) Chile Feb CPI M/M: 0.2%e v 0.1% prior; Y/Y: No est v 4.2% prior; CPI Ex Perishables & Fuel M/M: No est v 0.1% prior
- 6:00 (ZA) South Africa Jan Manufacturing Production M/M: No est v -1.3% prior; Y/Y: No est v 2.4% prior
- 6:00 (DE) Germany Jan Industrial Production M/M: +1.1%e v -2.9% prior; Y/Y: 1.1%e v 0.9% prior
- 6:30 (PL) Poland to sell up to PLN3.5B in 4.75% Oct 2016 Bonds
- 7:00 (UK) Bank of England (BOE) Interest Rate Decision: Expected to leave Interest Rate unchanged at 0.50%; Maintain Asset Purchase Target unchanged at £325B
- 7:30 (US) Feb Challenger Job Cuts Y/Y: No est v 38.9% prior
- 7:45 (EU) ECB Interest Rate Decision: Expected to leave Interest Rate unchanged at 1.00%
- 8:15 (CA) Canada Feb Housing Starts: 200Ke v 198.0K prior (revised from 197.9K)
- 8:30 (CA) Canada Jan New Housing Price Index M/M: 0.1%e v 0.1% prior; Y/Y: 2.5%e v 2.5% prior
- 8:30 (US) Initial Jobless Claims: 351ke v 351K prior; Continuing Claims: 3.40Me v 3.418M prior
- 8:30 (EU) ECB chief Draghi holds monthly post rate decision press Conference; March staff projections
- 9:00 (CA) Bank of Canada Interest Rate Decision: Expected to leave Interest Rate unchanged at 1.00%
- 9:00 (MX) Mexico Feb Consumer Prices M/M: 0.3%e v 0.7% prior; Y/Y: 4.0%e vs. 4.1% prior; CPI Core M/M: 0.5%e v 0.5% prior
- 9:00 (BR) Brazil Jan CNI Capacity Utilization: 81.7%e v 81.3% prior
- 9:30 (US) Commercial Paper Outstanding
- 10:30 (US) Weekly EIA Natural Gas Inventories
- 12:00 (DE) Germany Fin Min Schaeuble attends podium on Theme of Europe: Berlin
- 15:00 (GR) Deadline for bond holders to participate in Greece PSI debt swap
- 16:00 (KR) South Korea Feb Producer Price Index Y/Y: No est v 3.4% prior
- 18:00 (PE) Peru Central Bank Interest Rate Decision: Expected to leave the Reference Rateunchanged at 4.25%
- 20:30 (CN) China Feb Producer Price Index Y/Y: 0.1%e v 0.7% prior
- 20:30 (CN) China Feb Consumer Price Index Y/Y: 3.4%e v 4.5% prior Legal disclaimer and risk disclosure All information provided by Trade The News (a product of Trade The News, Inc. "referred to as TTN hereafter") is for informational purposes only. Information provided is not meant as investment advice nor is it a recommendation to Buy or Sell securities. Although information is taken from sources deemed reliable, no guarantees or assurances can be made to the accuracy of any information provided. 1. Information can be inaccurate and/or incomplete 2. Information can be mistakenly re-released or be delayed, 3. Information may be incorrect, misread, misinterpreted or misunderstood 4. Human error is a business risk you are willing to assume 5. Technology can crash or be interrupted without notice 6. Trading decisions are the responsibility of traders, not those providing additional information. Trade The News is not liable (financial and/or non-financial) for any losses that may arise from any information provided by TTN. Trading securities involves a high degree of risk, and financial losses can and do occur on a regular basis and are part of the risk of trading and investing. Daily Forex Market News
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TradeTheNews.com European Market Update: Risk appetite finds footing aided by China GDP data and German ZEW survey

Tuesday, January 17, 2012 5:54:21 AM
 TradeTheNews.com European Market Update: Risk appetite finds footing aided by China GDP data and German ZEW survey
***Economic Data***
- (EU) ECB: €1.6B borrowed in overnight loan facility vs. €2.4B prior; parked in overnight deposit facility (fresh record higs) vs. €493.3B prior
- (FI) Finland Dec PPI M/M: -0.4% v 0.0% prior; Y/Y: 1.8% v 3.7% prior
- (SE) Sweden Dec PES Unemployment Rate: 4.7% v 4.6%e
- (EU) Dec EU 25 New Car Registrations: -6.4 v -3.5% prior
- (ZA) South Africa Nov Gold Production Y/Y: -4.5% v -3.3% prior; Mining Production Y/Y: -4.6% v -9.0%e
- (UK) Nov DCLG UK House Prices Y/Y: -3.3% v -0.4% prior
- (UK) Dec CPI M/M: 0.4% v 0.4%e; Y/Y: 4.2% v 4.2%e; Core CPI Y/Y: 3.0% v 3.0%e
- (UK) Dec RPI M/M: 0.4% v 0.3%e; Y/Y: 4.8% v 4.7%e; RPIX Y/Y: 5.0% v 4.9%e; Retail Price Index: 239.4 v 239.1e
- (DE) Germany Jan ZEW Economic Sentiment: -21.6 v -49.4e (highest reading since July 2011); Current Situation: 28.4 v 24.0e
- (EU) Euro Zone Dec CPI M/M: 0.3% v 0.4%e; Y/Y: 2.7% v 2.8%e; CPI Core Y/Y: 1.6% v 1.6%e
- (EU) Euro Zone Jan ZEW Economic Sentiment: -32.5 v -54.1 prior
- (BR) Brazil Jan FGV Inflation IGP-10 M/M: 0.1% v 0.0%e
- (IS) Israel Jan Inflation Forecast: 2.3% v 2.2% prior
- (IS) Israel Dec Money Supply Y/Y: 2.5 v 1.9% prior

Fixed Income
- (ZA) South Africa sold total ZAR2.1B vs. ZAR2.1B indicated in 2020 and 2041 Bonds
- (ES) Spain Debt Agency (Tesoro) sold total €4.88B vs. €5.0B indicated in 12-Month and 18-Month Bills
- Sold €3.01B in 12-month Bills; Avg Yield 2.049% v 4.050% prior; Bid-to-cover: 3.54x v 3.14x prior; Max Yield 2.150% v 4.088% prior
- Sold €1.87B in 18-month Bills; Avg Yield 2.399% v 4.226% prior; Bid-to-cover: 3.23x v 4.97x prior; Max Yield 2.490% v 4.250% prior
- (GR) Greece Debt Agency (PDMA) sold 1.625B€ vs. €1.25B indicated in 13-week Bills; Avg Yield 4.64% v 4.68% prior; Bid-to-cover: 2.90x v 2.91x prior
- (EU) ECB allotted €126.9B in 7-day Refi Operations vs. €100Be at fixed 1.0%
- (EU) ECB allotted €38.7B in 1-month Refi Operation at fixed 1.0% vs. €41.2B prior
- (HU) Hungary Debt Agency (AKK) sold HUF55B vs. HUF45B in 3-Month Bills; Avg Yield 7.84% v 7.98% prior; Bid-to-cover:3.15x v 2.74x prior
- (BE) Belgium Debt Agency sold total €2.96B vs.€3.0B indicated in 3-month and 12-month Bills
- Sells €1.76B vs. €1.8B in 3-month Bills; Avg Yield 0.429% v 0.264% prior; Bid-to-cover: 2.23x v 2.13x prior
- Sells €1.20B vs. €1.2B in 12-month Bills; Avg Yield 1.162% v 2.167% prior; Bid-to-cover: 2.06x v 2.21x prior
- (EU) EFSF sells €1.501B vs. €1.5B indicated in 6-month Bills; Avg Yoeld 0.2664%; Bid-to-cover: 3.1x (First issuance of this maturity)
*** SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM ***
***Notes/Observations***
- S&P downgrades EFSF one notch to AA+ following the prior French, Austrian cuts
- China Q4 GDP at 2 year lows but above analysts' estimates
- Germany Jan ZEW Survey improves to its best reading since July 2011
Equities:
FTSE 100 +1.1% at 5717, DAX +1.8% at 6334, CAC-40 +1.6% at 3277, FTSE MIB +1.4% at 15,432, SMI +0.50% at 6063
- European shares recovered their losses taking cue from Asian trading even after China's data showed economic slowing. As expected, S&P downgraded EFSF rating to AA+, an action which did not move markets. However, German ZEW data was the highest reading since July 2011 marking a significant improvement in sentiment.
In corporate news, Metro AG [MEO.DE] rallied after exceeding analysts' expectations. Company decided to discontinue divestment activities related to Galeria Kaufhof. Burberry [BRBY.UK] also reported its Q3 revenues which had increased over the year. Shares were trading lower.
Speakers:
- ZEW Economists commented that the improvement in the ZEW sentiment was helped by improved US data and lower EMU yields improvement. The ZEW saw the Germany economy stabilizing over the next six months. Contrary to repeatedly expressed fears of recession, the assessment of experts gives reason for cautious optimism.
- ZEW's Franz commented that Germany would only experience a "dent" in its economic activity and noted that the ECB generous liquidity operations supported rise in sentiment. He did caution that the EU debt crisis remains risk to economic growth.
- ECB's Nowotny commented that the central bank was looking for alternatives for the Govt Bond Buying program (SMP) and that discussions included the entire monetary policy spectrum and instruments. He noted that a triple A rating for ESM facility was possibly but not necessary. On monetary policy Nowotny stated that the ECB never pre-commits on interest rate decisions but did note that the ECB had taken clear steps not only in terms of interest rate decreases, but also in terms of the very massive broadening of liquidity provision and of the opinion that it was now about capturing the full effect of these measures. He believed the S&P downgrade of Austria was political to an extent but not without cause.
- ECB's Nowotny commented at a Euromoney conference that a negative feedback loop with sovereign debt crisis has occurred and needed higher growth in order to stabilize budgets. The banks 9% core tier 1 capital plan by mid-2012 was unfortunate and increased problems. Supervisors needed to assess bank capital plan to avoid restrictive impact on lending. Emerging Europe would grow faster than EU average but added that convergence woud be at a slower rate
- Fitch Sovereign Director Parker commented that Greece was insolvent and would default 'quite soon', which should not be a surprice. He added that Greece would not likely to honor its March 20th bond payment nd that the EU debt crisis would be both long and drawn out process
- EU's Buti reiterated view that Greek debt swap negotiations (PSI) are currently paused
- German Govt Advisor Franz stated that the Euro would survive with 17 members still in it in a year's time
- EFSF chief Regling commented that the European nations did have a plan to lower deficits
but conceded that Greece was a difficult case. He noted that there was not much impact from S&P downgrade, so long as Moody's and Fitch did not follow. Investors have lost confidence in European policy making and are afraid that the Euro Zone might break up but such fears are unfounded. EFSF never had issues placing bonds as it has had good demand from Asia and Middle East investors and had significant preliminary commitments from global investors
- metals consultancy GFMS commented that 2011 global gold demand was at 4,436 tons, +2% y/y while global gold investment was at 1,563 tons, -7.0% y/y. Gold to average $1,640/oz in H1 2012 and could test support around $1,550/oz and could break $2,000/oz by late 2012 or early 2013. It noted that gold market was near closing its decade long bull rally but added that economic and political backdrop still favored gold and could 'fire up' on re-emergence of US concerns. China might overtake India as top gold consumer in H1 2012
Currencies:
- The Euro continued to rebound from last Friday's lows of 1.2622 and continued to shake off the multi-country sovereign downgrade from S&P last Friday and subsequent cut in the EFSF facility rating by a notch. Risk appetite also improved as traders assessed China's Q4 GDP data and better German ZEW survey. EUR/USD held a key support of 1.2660 on Monday and tested the 1.28 area by the NY morning in today's session. The Euro was also supported by comments from ECB Nowotny who indicated that the ECB was not planning to cut its main refi rate further any time soon as it would study the recent cuts and massive central bank liquidity operations. The Euro did stall at the 1.28 level after Fitch sovereign director Parker bluntly stated that
Political/ In the Papers:
- The Irish government provided an update and identified suitable assets to sell per troika bailout agreements. Stake sales include 25% stake in Aer Lingus, Dublin Port, and parts in Bord Gis and Coillte. The finance minister and the public expenditure minister is to meet senior officials Thursday morning, prior to the release of two separate press conferences. The government added that it has met all the targets in line with the program.
- Various banks in Europe are looking to find ways to raise capital without the use of share sales. Certain banks are seeking to revise their accounting methods related to prior acquisitions in order to boost capital levels. Banks are also seeking to restructure their capital structures in order to raise certain types of capital. European banks are expected to present their capital raising plans to the EBA by the end of this week.
- Some fund managers remain concerned about the possibility of a "messy" default for Greece. The FT reported that if there were a disorderly default for Greece, then it could lead to write downs of more than €50 billion. Also, if there is an orderly default for Greece, it could lead to further contagion.
***Looking Ahead***
- (GR) EU/IMF/ECB Troika mission to Greece begins (technical team)
- (EU) ECB's Reserve Maintenance Period Ends
- (ES) Spain Q4 House Price Index Q/Q: No est v -1.3% prior; Y/Y: No est v -5.5% prior
- 6:00 (TU) Turkey sells TRY in to sell 2013 and 2018 Bonds
- 7:00 (EU) ECB to drain €217.0B in 7-day Term Deposit Tender to offset bond purchases
- 7:30 (ES) EU President Van Rompuy meets Spain PM Rajoy in Madrid
- 8:00 (BR) Brazil Nov CNI Capacity Utilization: 81.6%e v 81.4% prior
- 8:30 (CA) Canada Nov Int'l Securities Transactions: No est v C$2.03B prior
- 8:30 (US) Jan Empire Manufacturing: 11.00e v 9.53 prior
- 8:30 (US) Revisions: Empire State Manufacturing Activity Index
- 9:00 (CA) Bank of Canada Interest Rate Decision: Expected to leave Interest Rate unchanged at 1.00%
- 9:00 (US) OccupyDC holds an Occupy Congress rally.
- 9:45 (UK) BOE to buy £1.7B in 2038-2060 Gilts in reverse auction
- 10:00 (MX) Mexico International Reserves w/e Jan 13th No est v $144.1B prior
- 11;30 (UK)BOE member Posen
- 11;30 (DE) Bundesbank Gov Weidmann
- 11:30 (US) Treasury to sell 3-Month and 6-Month Bills
- 18:00 (IT) Italy PM Monti travels to London to meet with PM Cameron at London School of Economics
- (CN) EU Barnier travels to Beijing, China
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