$USD Slides Following China Rate Cut, All Eyes On Bernanke Testimony

07 June 2012 13:30 GMT Talking Points
U.S. Dollar: Correction Gathers Pace On China Rate Cut, All Eyes On Bernanke Euro: RSI Carving Upward Trend, Spain Faces Higher Finance Costs British Pound: Testing Former Support, BoE Holds Current Policy U.S. Dollar: Correction Gathers Pace On China Rate Cut, All Eyes On Bernanke
The greenback weakened further on Thursday, with the Dow Jones-FXCM U.S. Dollar Index (Ticker: USDOLLAR) slipping to a fresh weekly low of 10,143, and the rise in risk sentiment may continue to dampen the appeal of the reserve currency as market participants see the international community increasing its effort to tackle the debt crisis. Indeed, the People’s Bank of China lowered its one-year lending rate by 25bp, which will take effect on June 8, and it seems as though the world’s second-largest economy will continue to embark on its easing cycle as the debt crisis continues to dampen the outlook for global growth.
As market participants turn their attention to Fed Chairman Ben Bernanke’s testimony in front of Congress, the fresh batch of central bank rhetoric is likely to heavily impact the USD, and a slew of dovish commentary may further weaken the greenback as market participants increase bets for another round of quantitative easing. However, as Fed officials continue to take note of the more robust recovery, it will be increasingly difficult for the central bank head to justify QE3, and we may see Mr. Bernanke strike a more balanced tone for monetary policy as the recovery gradually gathers pace. In turn, we will pay close attention to his fundamental assessment for the U.S. economy, and we may see the dollar regain its footing should the Fed chairman strike an improved outlook for growth and inflation.
Euro: RSI Carving Upward Trend, Spain Faces Higher Finance Costs
The Euro rallied to 1.2610 amid the rise in risk-taking behavior and the rebound in the EURUSD may turn into a larger correction as the global movement to ease policy helps to prop up market sentiment. Indeed, Spain sold EUR 2.07B in bonds yielding 6.044% versus the EUR 2.0B target, but heightening finance costs across the region continues to raise the threat for contagion as European policy makers look to buy more time. In turn, it seems as though the European Central Bank is getting ready to act in July, but the Governing Council may have little choice but to carry out its easing cycle throughout 2012 as the fundamental outlook for the region turns increasingly bleak. As the EURUSD struggles to push back above the 23.6% Fibonacci retracement from the 2009 high to the 2010 low around 1.2640-50, we may see the pair face range-bound price action over the near-term, but we will be keeping a close eye on the relative strength index as it appears to be forming an upward trend.
British Pound: Testing Former Support, BoE Holds Current Policy
The British Pound showed a fairly muted reaction to the Bank of England interest rate decision as the central bank stuck to its current policy in June, but we’re seeing the GBPUSD come up against former support around the 1.5600 as currency traders increase their appetite for risk. As the BoE refrains from releasing a policy statement, market participants will certainly look forward to the meeting minutes due out on June 20, and another 8-1 vote count may instill a bullish outlook for the sterling as it dampens speculation for more quantitative easing. As central bank officials anticipate to see a more robust recovery later this year, we should see the Monetary Policy Committee preserve its wait-and-see approach throughout 2012, and the board may continue to move away from its easing cycle amid the stickiness in underlying price growth. If the GBPUSD fails to clear 1.5600, we should see the pair track sideways ahead of the BoE Minutes, and the pound-dollar may build a short-term base in June as it continues to hold above the 50.0% Fib from the 2009 low to high around 1.5270.

$ 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.

Equities Rout Comes Full Circle Following Dismal U.S. Labor Data

while the relentless debt crisis in the euro zone was certainly a contributor, as was the slowdown in China was likely on Friday unexpectedly poor U.S. labor data – suggesting that the US economy is not immune from global concerns, after all – that jarred Asian stock markets today. The Nikkei, Japan's large market shares, was 2% to a low of 6 months? the index has fallen approximately 19.3%, since the end of March, as is the situation in the eurozone and China are weighing heavily on Japanese exports. Meanwhile the wider Japanese Topix index slipped to a low 28-year loss of 2,1%.
Analysts expect tumbler that DAX and CAC40 of Europe would also hard at the beginning, with futures below 100 and 50 points, respectively. On Friday, the DAX closed 6, 050.29, 3.42%, while the CAC expire on 2, 950.47, loss of 2.21%. Couldn't help Wall Street, but play follow the leader, with the dropping to 12 DJ30 170.45, loss, 1.80%, the deviation of 1, 284.81 SPX500 points or 1.95% while the NASDAQ fell to 2, 765.42, a loss of 2,19%.
French merchant sibille28 hit a triple with three closed short positions advantageously, DAX, with profits 13.10 4.82% 9.31%. Swiss trader Paladium72, new OpenBook, scalped a small profit 1,87% on a short position in the CAC40 and a brief SPX500-4.00% profit a trader 3.1% allocation during the CAC40 returned 6.4% for the month. The merchant has posted a P/L for a week of 48.7% and for the month of 51.1%.
OpenBook trader anillochab managed to profit from the long side of a trade DJ30 twice, most recently posting a 10% profit on a long value only opened a few hours ago. The trader also had a strong position against hit of TP DJ30 Friday with an 11.82% profit.

EU Market Update: Risk Aversion remains heightened in session; GBP slumps following BOE quarterly inflation report

Wednesday, May 16, 2012 5:51:17 AM TradeTheNews.com EU Market Update: Risk Aversion remains heightened in session; GBP slumps following BOE quarterly inflation report***Economic Data***
- (EU) ECB: €2.0B borrowed in overnight loan facility €1.6B prior; €788.4B parked in deposit facility v €788.2B prior
- (EU) Euro Zone Apr EU 25 New Car Registrations: -6.9% v -7.0% prior (7th straight monthly decline)
- (TR) Turkey Apr Consumer Confidence: 91.1 v 93.9 prior
- (AT) Austria Apr Consumer Price Index M/M: 0.4% v 1.1% prior; Y/Y: 2.3% v 2.4% prior
- (CZ) Czech Mar Current Account (CZK): 16.8B v 13.9Be >- (IT) Italy Mar Total Trade Balance: +€2.1B v -€1.1B prior; Trade Balance EU: €1.6B v €416M prior
- (UK) Apr Jobless Claims Change: -13.7K v +5.0Ke; Claimant Count Rate: 4.9% v 5.0%e
- (UK) Mar Average Weekly Earnings 3M/Y: 0.6% v 1.0%e; Weekly Earnings ex-Bonus 3M/Y: 1.6% v 1.4%e
- (UK) Mar ILO Unemployment Rate: 8.2% v 8.4%e >- (EU) Euro Zone CPI M/M: 0.5% v 0.5%e; Y/Y: 2.6% v 2.6%e; Core CPI Y/Y: 1.6% v 1.5%e
- (CH) Swiss May Credit Suisse ZEW Expectations Survey: -4.0 v +2.1 prior
- (IC) Iceland Central Bank (Sedlabanki ) raised 7-Day Lending Rate by 50bps to 5.50%
- (EU) Euro Zone Mar Trade Balance Seasonally Adj: €4.3B v €3.8Be; Trade Balance unadj: €8.6B v €4.0Be
Fixed Income: >- (RU) Russia cancelled its 10-Year OFZ Bonds
- (EU) ECB alloted $300M in 7-Day USD Liquidity Tender at fixed 0.66% vs. $326.3M prior
- (FR) France Debt Agency (AFT) sold €8.0B vs.€7-8B indicated range in 2014, 2015, 2016 and 1017 BTANs, OATs
- Sold €2.505B in 0.75% Sept 2014 BTAN; Avg Yield 0.74% v 0.85% prior; Bid-to-cover: 2.97x v 2.29x prior
- Sold €945M in 3.5% Apr 2015 OAT; Avg Yield 0.95% v 1.06% prior; Bid-to-cover: 4.58x v 3.0x prior
- Sold €895M in 3.25% Apr 2016 OAT; Avg Yield 1.37% v 2.80% prior; Bid-to-cover: 4.97x v 4.50x prior
- Sold €3.651B in 1.75% Feb 2017 BTAN; Avg Yield 1.72% v 1.83% prior; Bid-to-cover: 2.04x v 2.69x prior
- (DE) Germany sold €4.107B in 1.75% July 2022 Bund; Avg Yield 1.47% (fresh record low) v 1.77% prior; Bid-to-cover: 1.5x v 1.1x
*** SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM ***
***Notes/Observations***
- China's "Big Four" state-run banks have issued almost no new yuan loans in the first half of May
- Germany and ECB said to be at odds over EFSF guarantees
- UK Claimant Count registers its largest monthly decline since July 2010
- ECB holding a previously scheduled meeting in Frankfurt
***Equities*** >FTSE 100 -1.1% at 5378, DAX -1% at 6335, CAC-40 -0.10% at 3036, IBEX-35 -1% at 6636, FTSE MIB -0.40% at 13,253, SMI -0.05% at 5860
- European equity indices opened the session broadly lower, as indices have been pressured by banks. Additionally, resource-related companies opened lower following cautious comments out of BHP about the outlook for commodity prices. Concerns about Greece have continued to weigh on the markets, following reports from yesterday that the country is expected to hold elections in mid-June. Also, Greek banks have been in focus, amid reports that deposit outflows have accelerated following the recent Greek parliamentary elections. In terms of upcoming event risks, the US Fed is due to release the minutes from its most recent policy meeting later today. Also on Thursday's session, Spain is due to sell 2015 and 2016 bonds.
- UK-listed construction and engineering services company Lamprell [LAM.UK] has declined by over 60%, after disclosing a profit warning. Additionally ,shares of Bovis Homes [BVS.UK] and Land Securities are trading lower, following the release of their respective earnings reports. German names Rheinmetall [RHM.DE], Lanxess [LXS.DE], Prosieben [PSM.DE] and Symrise [SY1.DE] have all been weighed down by ex-dividend factors. In France, EADS [EAD.FR], EADS has gained over 1% following its Q1 earnings release. Swiss luxury watch maker Richemont [CFR.CH] has gained over 4%, as the company reported better than expected FY11 results. Danish shipping name AP Moller Maersk [MAERSKB.DK] has lost over 5% amid concerns about the company's 2012 outlook. Shares of Italian bank, Banca Monte Paschi have lost more than 2%, after the company reported a y/y decline in its Q1 net profit. Monte Paschi also reported a 4.9% sequential rise in its bad loans in Q1.
Speakers: >- Bank of England Releases Quarterly Inflation Report which raised inflation forecast with CPI seen above 2% for the next year or so compared to its Feb forecast of until Q4 2012. The report noted that Inflation report chart shows CPI at around 1.6% in 2 years and at 1.8% in 3 years assuming market interest rate path and AFT steady at £325B
- BoE Gov King stated during Q&A that contingency plans were being discussed for some time with UK Treasury and FSA regarding the euro area. On QE decision he noted that ultimately have to be driven by inflation outlook, last week decision consistent with that idea.
- Germany Fin Min Schaeuble reiterated the view that all wanted Greece to remain in the Euro but the Greek political parties had the choice and it was their responsibility. He stressed that differences between Chancellor Merkel and new French President Hollande were not large and that Germany economic growth was robust because the country was reducing its deficit. Lastly he noted that was working on Financial Transaction Tax (tobin tax) in a smaller group of EU members
- Spain PM Rajoy commented that Spain faced risk of astronomical borrowing costs in an address to Parliament
- Ireland PM Kenny noted that enormous challenges lie ahead; Ireland will continue to meet all commitments
- Ireland Fin Min Noonan stated that he hope to get back to bond market by end 2013 but might not due to uncertainty in Europe. He added that it was not a guarantee that Greece would leave the Euro Zone and maybe Greece needed a referendum whether to stay in the EMU
- Finland PM Katainen: Risk of contagion from Greece as the situation is threatening Spain, Italy and Portugal
- China PBoC Gov Zhou commented that China to steadfastly prevent systemic financial risk
- Poland Fin Min Rostowski commented that he expected there would be some significant weakening of the PLN currency (Zloty) due to Greece fears
- India Central Bank Dep Gov Kahn stated that the RBI was closely watching INR currency volatility and it would take all steps to curb such volatility
- India Central Bank Chakrabarty commented that the RBI would only intervene in FX markets to curb INR volatility
- Russia Central Bank Gov Ignatyev stated that Apr YTD Capital Outflows was $42B and that such outflows remained a serious problem for the economy. The CBR remained determined to hold inflation between 5.0-6.0%
- India Fin Min Mukherjee: Reiterates India's growth story is intact
Currencies:
- Euro zone crisis remain the leading influence in the session and kept the USD well supported against the majors and commodity-related currency pairs. The session began with a heightened amount of risk aversion prevalent but by mid-morning sentiment calmed down. Perhaps that the ECB was holding a previously scheduled conference today on Monetary Policy Conference in Frankfurt helped ease concerns. However some dealers misconstrued it as an 'emergency meeting'
- The EUR/USD continued to hit fresh 4-month lows as it tested 1.2682 in the session. The European peripheral yield was higher with the 10-year Spanish/German Gov't bond spread at 510bps for fresh EMU record. Dealers were on guard whether Moody's would make any cuts in Spanish banking sector after doing so for Italy earlier in the week. The 10-year Italian bond yield pushed firmly above the 6% area but a move towards 7% would heighten concerns and possible re-activate the ECB SMP program. With Greece heading for fresh elections next month, fears of capital flight mounted and yesterday the Greek central bank confirmed that €700M in deposit had been withdrawn in recent days.
- The implication on global growth was also on the minds of traders. China's "Big Four" state-run banks were said to have issued almost no new yuan loans in the first half of May. The AUD/USD pair was suffering not only from euro zone risks, yet also concerns that activity in China's economy may be faltering
- The GBP slumped lower to approach 1.5900 after the BOE inflation report which did raise its short term CPI view but overall remaining in target in 2-3 year time frame
Political/ In the Papers:
- The CBRE Group expects further defaults in European commercial real estate loans due to declining rents and occupancies. The trend is affecting many areas, now including large city centres such as London and Frankfurt. Values are currently down by almost 20% from their peaks in 2007.
- With the concerns related to a possible Greek collapse, the Irish Independent calculated that such an event would cost each Irish resident €380. It added that the true costs would be greater because Ireland would have to deal with a five-year financial crash if Greece were to exit the currency. According to Citi, the loans to Greece now stand at €160B, owed either to the ECB or euro zone countries as a share of the bailout (with Ireland's portion calculated at slightly above 1%, or a little over €380 per person). The independent clarified that the exact figure is difficult to assess due to Ireland's own euro zone loans.
- The Telegraph's Ambrose Evans-Pritchard looked at the risks related to Italian banks noting that the contracting economy is a challenge for domestic banks, as Italian banks are highly exposed to the economy. He also added the contagion risks that Italian banks face in relation to Greece.
- The ECB was said to have cut liquidity support for Greek banks according to the Dutch press. The cut in support was due to Greece holding off on recapitalizing its banking system, although it received €25B in funds for that purpose. At the end of January, Greek banks received €73B in liquidity support from the ECB, although the amount was down by over 50%.
***Looking Ahead***
- 6:00 (PL) Poland to sell New 5-Year Fixed Rate Bonds
- 6:00 (RU) Russia to sell Up to RUB20.0B in 10-Year OFZ Bonds
- 6:00 (FR) France Debt Agency (AFT) to sell I/L 2022, 2023 and 2027 Bonds
- (IT) IMF mission visit to Italy
- 6:00 (GR) Greece interim govt expected to be announced; election date
- 6:00 (DE) German Govt Advisor Feld
- 6:00 (PT) Portugal Q1Unemployment Rate: No est v 14.0% prior
- 7:00 (UK) Prime Minister's Question Time in House of Commons
- 7:00 (US) MBA Mortgage Applications w/e May 11th: No est v 1.7% prior
- 7:00 (ZA) South Africa Mar Retail Sales Constant M/M: No est v -2.2% prior; Y/Y: No est v 7.2% prior
- 8:00 (PL) Poland Mar Current Account: No est v -€1.6B prior; Trade Balance: No est v -€838M prior
- 8:30 (CA) Canada Mar Manufacturing Sales M/M: No est v -0.3% prior
- 8:30 (US) Apr Housing Starts: 685Ke v 654K prior; Building Permits: 730K v 764K prior (revised from 747K)
- 9:00 (DE) German Fin Min Schaeuble speech on crisis themes: University of Aachen
- 9:00 (EU) ECB's Monetary Policy Conference in Frankfurt
- 9:15 (US) Apr Industrial Production: 0.6%e v 0.0% prior; Capacity Utilization: 79.0%e v 78.6% prior; Manufacturing Production: No est v -0.2% prior
- 10:30 (US) Weekly DOE Energy Inventories
- 11:30 (BR) Brazil Central Bank weekly currency flows
- 12:00 (US) World Bank President Zoellick
- 12:30 (US) Fed's Bullard speaks on US Economy in Louisville, Kentucky
- 12:45 (EU) ECB member Gonzalez-Paramo
- 14:00 (US) Fed Releases Minutes from April 24-25 FOMC Meeting
- 14:00 (US) Minutes of FOMC Meeting
- 17:00 (CO) Colombia Mar Trade Balance: No est v $537.2M prior; Imports CIF: no est v $4.5B prior
- 18:00 (HU) Hungary Central Bank Gov Simor speaks at EBRD Conference
- 18:00 (HU) Hungary Central Bank VP Kiraly speaks
- 18:00 (EU) EU's Juncker speaks at German Fin Min Schaeuble award ceremony in Aachen, Germany
- 18:00 (CL) Chile Central Bank Economists Publish Report
- 19:50 (JP) Japan Q1 Preliminary GDP Annualized: +3.5%e v -0.7% prior; GDP Q/Q: +0.9%e v -0.2% prior; Nominal GDP Q/Q: +1.0%e v -0.5% 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.

€ Euro Consolidates Following 2nd Straight Spanish Economic Contraction

The Takeaway: the Spanish GDP drops 0.3% for the first quarter of 2012, as expected-> severe austerity measures set for 2013-> Euro consolidates lower annual
The Spanish economy decreased during the second quarter, as the gross domestic product in Q1 2012 reached 0.3% from the previous quarter, to meet the expectations of analysts. GDP in the first quarter was also a decline of 0.4% from the first quarter of 2011, according to the National Institute of statistics.
The ongoing economic downturn comes in the middle of the harsh austerity, Spain sets a target of cutting its deficit target budget for 2012 to 5.3% of GDP and 3% of GDP in 2013. Current austerity measures are the deepest in recent decades, but Prime Minister Mariano Rajoy fears a lack of market confidence to lend to the Spain, if the country is not severely reduce its spending.
As the Spain struggles to contain his ready confidence, his point of reference of the yields of the bonds of 10 years increased by 6.3% compared with only a 5% performance early in March.
Construction and real estate are two sectors that have experienced heavy downturn. Construction decreased by 3.1%, compared to a loss of 1.1% in the previous quarter. Real estate has slowed down 2.5% from a previous gain of 0.8%. Household spending fell 0.6% from the previous year.

EUR/USD fell following the release of the GDP, but the move could be considered more a grouping over the 1.2625 2012 low and less than a reaction to the expected economic contraction.
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$ Australian Dollar Purchased Following Positive Employment Report

Employment data published by the Australian Bureau of Statistics show an addition of 15,500 jobs to the Aussie economy, causing the unemployment rate to fall to 4.9 percent. The rise in jobs drew mostly from part time work, which added 26,000 jobs to payroll. Full time work experienced has 10,500 drop in workers. The overall participation rate fell to 65.2 percent from 65.4 percent a month earlier.

Analysts expected the unemployment rate to rise to 5.3 percent this month, a 5,000 job decrease in total employment, and a flat participation rate. Neither analysts nor the markets expected an improvement of such magnitude this month, and traders were forced to price in the change, boosting the AUDUSD upward. Though overall jobs increased in number, the drop in full time employment as well as the unexpected decline in the participation rate tempered the positive trading sense response to the lower unemployment rate. Nonetheless, the figures did suggest to analysts a decreased likelihood of a Reserve Bank of Australia (RBA) rate cut next month. Before the release, markets expected a 96 percent probability of a 25 basis point rate cut by the RBA in the upcoming period. Following the release, those expectations fell to 68 percent probability.

::: Cable Extends Declines Following Weak UK Service Sector Expansion

03 May 2012 09:07 GMT THE TAKEAWAY: UK PMI Services comes in at 53.3 for April, less than 54.1 expected -> Gains in new business in the service sector were outweighed by growing margins -> Cable rises, but sterling takes gains against euro UK Purchase Manager Index for Services came in at 53.3 for April, it’s lowest point in 2012 and well below analysts’ 54.1 expectations. The index result is still above 50 and therefore signals continued growth in the service sector, but it is lower than last month’s 55.3 result. The PMI has remained positive for 16 consecutive months, but April’s expansion was the weakest since November.
Service sector managers’ expectations remained high in April as there were gains in new business; however the margins for business rose as input costs went up and output charges remained the same when compared to March.
The PMI service is a survey based on material purchases in the service industry and managers’ expectations for the future; the index can be seen as a good gauge for the economy on whole, as services provide for 75% of the UK’s output. April’s PMI manufacturing result was also weak and the UK has entered a technical recession following last quarter’s lower GDP.
 Cable fell following the PMI release, continuing an earlier session drop from the 1.6200 level. However, sterling gained against the euro following the index news, possibly the result of further risk-off sentiment.

||>> CHF following higher EURO - AUD disadvantage of scalp game Post ICC targets

Every day winners and losers


The Swiss franc is the stronger against a weaker dollar with an advance of 0.38% before the close European. Market sentiment is well supported with the actions and the yields of Treasury on the heels of yesterday risk global sell-off coast of rallying. Stronger than expected profits companies and an auction of liaison with success to temporarily relaxed Netherlands concerns about the worsening of the crisis in Europe with the euro and the franc Switzerland toping the trade performance of the United States charts. The USDCHF is now based at trendline mild support from 27 October with daily RSI also risking a break under load of trendline. This level should be compromised, look for the daily targets below the trendline support dating back to the Netherlands in February and the low February himself at 8930. Resistance superstructure key located at the confluence of the trendline resistance and the 23.6% Fibonacci extension taken in the hollow on 27 October and February 24 to 9175 and April-9250.

The graph of the scalp shows the swissie trade through training of canal descending with the holding pair, just over the shape extension made 23.6% Fibonacci, depressions in February and April-9095. Strengthen support just below based on 9070 and is supported by the 9040 support channel. Preliminary resistance is now 9130 and the confluence of the resistance of the canal and the extension of 38.2% to 9155. Look for the pair to remain heavy at the end with only a break to ease 9155 pressure decline for the pair.
Indicators of levels

Level/Indicator	Level
200-Day SMA	0.8905
100-Day SMA	0.9219
50-Day SMA	0.9121
2012 CHF HIGH	0.8930

 
The Australian dollar is low and is the only large heavy trade against the dollar. Lower that the inflation data released from the overnight has slammed the aussie in Asian trade early 1 q CPI coming to 1.6% y/y, missing calls for a reading of 2.2% y/y. Printing is a previous reading of 3.1% y/y and all but solidify expectations for the RBA cut interest rates next month with Credit Switzerland nights swaps factoring now a chance of 132%, to a point at the next meeting of the Central Bank policy. Twelve months expectations also fell sharply with investors seeking now points 109basis for additional reductions of the RBA. The AUDUSD pair continued to trade as part of a training dating road descending to March 6 with superstructures progress to the daily resistance at the confluence of the resistance of the channel and the tracing of Fibonacci 50% taken form December 15 advance to 1.0360. We reserve this level our limit of superstructure with a breach above deny our bearish medium-term bias. Daily support key is based on the tracing of 61.8% to 1.0240 and this level remains our main objective for the aussie. Note that daily RSI has remained below trendline resistance from the highs of March with a break of superstructure to alleviate the pressure on the pair.

The graph of the scalp shows the pair break above resistance RSI before bouncing on the 1.0320 early commercial soft resistance of the United States target. Interim support is now based in 1.0290 supported by the tracing of 78.6% collected on 10 April advance 1.0275 and 1.0250 Fibonacci. A break below this level exposes the bottom in April to 1.0225. Resistance superstructure stands at 1.3020 with ceilings suites SUV 50% resistance 1.0340 allows and the trendline, dating back to the highs of February. We continue to promote sale in rallies semis with only a breach over the extension of 38.2% to 1.0365 deny our bias in the short term. For complete AUDUSD extended of the scalp of targets, refer to the report of the week last of the scalp.
Indicators of levels

¥ Japanese Yen Undecided following Ho-Hum Trade Data

THE TAKEAWAY: Merchandise Trade Balance Fell to -¥ 82.6 Billion from ¥ 29.4 Billion > Traders Trader Reaction Muted as Improving Export Data Was Neutralized by a Jump in Imports > USDJPY Traded Sideways.

Data released by the Ministry of Finance and the Customs Office showed that the merchandise trade balance in February fell to -82.6 billion Yen from 29.4 billion Yen. The figure surpassed the -223.2 billion Yen deficit that analysts expected. Additionally, trade exports rose 5.9 percent on the year, beating the 0.2 percent increase forecasted and improving upon the 2.7 percent decline the prior year.

The figures painted a rosier than expected picture of an export-dominated Japanese economy and jumped on bears who forecasted a smaller increase in the country’s export sector. Though the data was tempered by a 10.5 percent increase in imports, which passed the 7.0 percent expected, the export figure did show the market that Japanese exporters were not faring as poorly as analysts thought.

Exports performing better than expected detracted from evidence that the Bank of Japan would ramp up its stimulus efforts in the near future. However, unexpectedly high import data suggested the opposite.

After the data was published, traders initially bought USDJPY, pushing it down from ¥81.296 to ¥81.160, but quickly sold their positions, leading the Yen up to ¥81.300. The currency pair continued to trade sideways in the minutes following the release.

Euro Unmoved Following Positive Industrial Production Data

12 April 2012 10: 02 GMT the takeaway: industrial production in the euro area increased by 0.5% in February, bat the expectations of analysts-> low production in Germany prevails over 13% increase to the Netherlands-> stays at the same level after the report to the EUR/USD

Eurozone industrial production increased 0.5% for the month of February, led by the France and the Netherlands. Actual production beat average estimates of a decline of 0.2%. However, the figures were 1.8% lower in February of the previous year, as expected by analysts.

The number can be seen as a sign of economic stabilization for the euro area; and a drop in industrial production in Germany and Spain was offset by the improvement of the production in France and the Netherlands. The German numbers released last week were not fully represented in number of today as the collapse of the production of the construction was not included in the survey of the euro area.

EUR/USD do not strongly respond to better than expected data. The pair rose and fell following the release, but who later moved back to the initial level.

DailyFX provides news forex and technical analysis on trends affecting the global currency.

Learn forex trading with a free practice account and FXCM maps.

12 April 2012 10: 02 GMT

TradeTheNews.com European Market Update: ECB deposits hit fresh record levels following 3-year LTRO operation

 Friday, March 02, 2012 5:49:18 AM TradeTheNews.com European Market Update: ECB deposits hit fresh record levels following 3-year LTRO operation***Economic Data***

- (RU) Russia Narrow Money Supply w/e Feb 27th (RUB): 6.85T v 6.84T prior
- (EU) ECB: €572M borrowed in overnight loan facility v €3.0B prior; €776.9B parked in deposit facility (fresh record high) vs. €475.2B prior - (DE) Germany Jan Retail Sales M/M: -1.6% v +0.5%e; Y/Y: 1.6% v 0.2%e
- (FI) Finland Q4 GDP Q/Q: 0.1%e v 0.9% prior; Y/Y: 1.3%e v 2.7% prior
- (HU) Hungary Dec Final Trade Balance: €325.0M v €352.1M prelim
- (ES) Spain Feb Net Unemployment M/M: +112.3K v +80.0Ke
- (ZA) South Africa Feb Naamsa Vehicle Sales Y/Y: 6.4% v 6.5%e
- (NO) Norway Jan Retail Sales Volume Y/Y: 6.7% v 2.6%e
- (UK) Feb PMI Construction: 54.3 v 51.3e
- (EU) Euro Zone Jan PPI M/M: 0.7% v 0.5%e; Y/Y: 3.7% v 3.5%e
- (IT) Italy 2011 Annual GDP: 0.4% v 0.3%e; Deficit to GDP:% v 4.0%e
*** SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM ***
***Notes/Observations***
- EU's Juncker: There is a plan B if the Greece debt swap fails
- Fed's Williams: More stimulus needed if recovery falters
- Euro Zone Leaders pave way for EU decision on Greek bailout agreement
- China diversifies away from USD
- Germany MoM Retail Sales disappoints
- Spanish Feb Net Unemployment climbs more than expected
Equities: FTSE 100 -0.10% at 5925, DAX flat at 6942, CAC-40 +0.20% at 3508, IBEX-35 +0.50% at 8592, FTSE MIB +0.60% at 16,926, SMI +0.10% at 6135
- European shares rallied lifted by a stronger banking sector which is up following ECB's LTRO allotment this week and press reports that EU leaders may agree to provide capital faster to the €500B permanent bailout fund. EU leaders may pay the first two installment this year and complete the capitalization in 2015, which is one year ahead of the schedule. Goldman Sachs also boosted the financial sector by upgrading European banks to Overweight
- Areva [CEI.FR] , as expected from yesterday's EU session, reported a €2.0B net loss due to provisions, the first loss in its history. However the company reiterated its outlook and noted that it aimed to raise at least €1.2B from asset sales in 2012-13 period. Meanwhile, the company agreed to sell both its stake in Eramet and in Canadian Millenium. Rentokil [RTO.UK] traded down after reporting its earnings and noted that its H1 performance in one of its units would continue to be disappointing.
Speakers: - The European fiscal compact was signed by 25 EU leaders. EU's President Van Rompuy stated that the measure would restore trust among EU states
- Germany Econ Min: Roesler commented in the German press that the supported the idea of placing a European Commissioner in charge of economic development in Greece but could not understand Greek objections to the proposal. He observed that the Greek people were aware of the needed sacrifices, but the Greek elite did not want to give up their privileges.
- BOJ Yamaguchi commented that the central bank might need new tools for its 1% CPI target and was flexible and ready to move if necessary. He noted the BOJ was not thinking about unwinding measures nor saw the need at this time to extend JGB period under program
- Japan Public Pension Fund (GPIF) (world's largest) reported its Oct-Dec qtr returns which rose by 0.58% compared to a prior loss of-3.32% q/q. It noted that it's posted a profit of ¥618.7B due to returns on foreign stocks. Assets at Jan end to head down to ¥108.1T.
- S&P EMEA managing director Fernandez de Heredia commented that Italy could return to an 'A' rating if country moved in the right direction regarding its debt, its growth and reforms. The first step by the rating agency would entail a change of Italy's outlook from negative to stable which depended on the debt, growth and the economic impact of the reforms of PM Monti's government. If Italy goes in the right direction, S&P wouldl take this first step. The recent decrease seen in govt' yields were not enough for the outlook to change, only sustainable impact of the reforms on growth can change the outlook
- Japanese purchasers seek force majeure clause in the event it was unable to pay Iran, or lift Iranian crude for lack of ship insurance coverage
Currencies:
- Concerns that the EU Leaders were waiting for the final outcome of the Greek PSI swap on March 9th and weaker German retail sales data pressured the EUR/USD from the getgo of the session. The record amount of deposits in the ECB's facility seemed to mirror the net new borrowing from the recent 3-year lending LTRO and prompted concerns whether bank would actually lend to assist the real economy.
- The EUR/USD tested 1.3240 before stabilizing in the session but was off some 505 pips from its Asian opening levels.
- The JPY weakness stalled during the mid-morning after testing 81.71. The higher oil prices said to be another factor weighing against the JPY currency sentiment as Japanese demand for oil surged after last year nuclear disaster.
Political/ In the Papers:
- The FT commented on concerns in Germany about the growth of the Bundesbank's balance sheet. The state bank's Target2 balance is about €500B, which reflects the amount that the German central bank has lent to the ECB. According to Commerzbank, Target2 claims are the largest part of the Bundesbank's balance sheet. As a reminder, Target2 is the joint gross clearing system of the ESCB that unifies the technical infrastructure of the 26 central (note-issuing) banks of the EU.
- Prosecutors in Germany raided various properties across Europe as part of an insider trading probe related to allegations that certain investors tried to inflate prices for penny stocks. German officials raided 53 properties in Germany and inquired about 29 other sites outside of Germany.
- The Telegraph's Ambrose Evans-Pritchard suggested that the recent European unemployment data shows a widening prosperity gap between the Northern and Southern EU economies. SocGen analyst Klaus Baader believed the EU's austerity measures are having a more negative than expected impact on the EU's labor markets, particularly in the peripheral countries.
- In an IMF report to the G20 ministers last weekend in Mexico, it was recommended that the ECB lower the target rate to less than 1% in addition to emergency loans to commercial lenders. Monetary policy needed to be kept highly accommodative, which the IMF said could be done by lowering the target policy rate (where there is still room), and by more unconventional measures if necessary.
- In its Credit Review Office (CRO) quarterly report on SMEs, the Ireland Finance Ministry targeted new lending requirements for both Allied Irish and Bank of Ireland. The new plan will require each bank to lend €3.5B in 2012, followed by an additional €4B each in 2013. Lending can take the form of new loans or restructuring old debt.
***Looking Ahead*** - (EU) EU Leaders Summit in Brussels
- (ES) Spain to present new budget targets
- 8:30 (CA) Canada Dec Gross Domestic Product M/M: +0.3%e v -0.1% prior; Y/Y: 1.9%e v 2.0% prior; Quarterly GDP Annualized GDP Y/Y: 1.8%e v 3.5% prior
- 9:45 (US) Feb ISM New York: No est v prior
- 10:00 (DK) Denmark Feb Foreign Currency Reserves (DKK): No est v 492.6B prior
- 16:00 (CO) Colombia Feb Producer Price Index M/M: No est v -0.5% prior; Y/Y: No est v 3.7% prior
- 20:00 (CN) China Feb Non-Manufacturing PMI: No est v 52.9 prior
- 20:00 (US) Fed's Bullard speaks on U.S. Economy in Vancouver
Weekend
Sat: (US) Republican Washington Caucus
Sun 18:00 (EU) Bank of International Settlements (BIS) holds Global Central Bank Meeting
Sun (RU) Russia Presidential Election 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. 

TradeTheNews.com European Market Update: Euro encounters profit-taking following recent rally

 TradeTheNews.com European Market Update: Euro encounters profit-taking following recent rally

***Economic Data***
- (GR) Greece Nov Current Account: -€2.5B v -€1.5B prior
- (RU) Russia Narrow Money Supply Narrow w/e Jan 16th(RUB): T v 7.15T prior
- (EU) ECB: €3.0B borrowed in overnight loan facility v €3.3B prior; €420.9B parked in deposit facility vs. €395.3B prior
- (DE) Germany Dec Producer Prices M/M: -0.4% v +0.1%e; Y/Y: 4.0% v 4.6%e
- (JP) Japan Dec Convenience Store Sales Y/Y: 4.1% v 7.5% prior
- (TH) Thailand Dec Customs Trade Balance: -$2.1B v -$1.4Be; Exports Y/Y: -2.0% v -10.0%e; Imports Y/Y: 19.1% v 5.3%e
- (HU) Hungary Nov Avg Gross Wages Y/Y: 6.0% v 5.4%e
- (TW) Taiwan Dec Industrial Production Y/Y: -8.2% v -6.6%e; Commercial Sales Y/Y: -0.5% v -0.8%e
- (TW) Taiwan Dec Export Orders Y/Y: -0.7% v -0.5%e (First decline in 2 years)
- (HK) Hong Kong Dec CPI Composite Y/Y: 5.7% v 5.6%e
- (NL) Netherlands Nov Consumer Spending Y/Y: -1.2 v -1.7% prior
- (IT) Italy Nov Industrial Orders M/M: +0.1% v -1.6% prior; Y/Y: -0.7% v -4.8% prior
- (IT) Italy Nov Industrial Sales M/M: 0.0% v 0.1% prior; Y/Y: 0.2% v 1.1% prior
- (UK) Dec Retail Sales Ex Auto Fuel M/M: 0.6% v 0.7%e; Y/Y: 1.7% v 1.7%e
- (UK) Dec Retail Sales (with Auto Fuel) M/M:0.6 % v 0.6%e; Y/Y: 2.6% v 2.4%e
- (ES) Spain Nov Trade Balance: -2.7B v -€3.5Be

Fixed Income
- (ZA) South Africa sold total ZAR800M in I/L 2022, 2028 and 2033 Bonds

*** SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM ***
***Notes/Observations***
- Greece pushes to reach agreement in Private Sector Involvement (PSI)with Monday seen as the pivotal day
- Today is the dealine for European bank to submit capital raising plans to EBA
- Jan China manufacturing PMI 48.8 vs 48.7 in Dec (third straight month of contraction)
- Taiwan Export order decline for the first time in 2 years
- China begins week long lunar new year holiday

Equities:
FTSE 100 +0.10% at 5747, DAX -0.30% at 6396, IBEX 35 -0.40% at 8572, FTSE MIB -0.30% at 15,617, SMI -0.40% at 6170

- European shares dipped during the session, presumably on profit taking, after a week of solid gains which culminated in a 5-month high on Thursday. US initial jobless claims fell to a 4-year low while in Europe, Greece is continuing its talks with private investors. Peripheral bond auctions were also successful despite recent sovereign downgrades.
- In individual names, Vodafone [VOD.UK] rose up to 1.8% after Indian Supreme court ruled it had no jurisdiction to tax Vodafone's 2007 acquisition of Hutchison Essar on its territory. Furthermore, it directed the government to return the money with a 4% interest and pay back Vodafone's deposit of INR25B. The tax liability could have been approx. €1.9B. On the other hand, Thyssenkrupp [TKA.GE] issued a profit warning even after refuting speculations that the company would do so during the week. Germany's largest steel maker expects its steel business earnings to be down y/y.

Speakers:
- BoE's Broadbent stated that he did not pre-commit to QE decisions and votes each month on stock of asset purchases. Gilt purchases speed not relevant to his QE decision. He noted that the downside risks had lessen slightly in past 6 months due to actions by central banks and had not seen what was most feared about the EU. He saw household income and growth to improve in H2 and the degree of fiscal tightening to ease. BoE to maintain GDP forecast of flat growth for both Q4, Q1 quarters as near term output looked slightly weaker but Q1 seemed marginally stronger.
- German Fin Min Schaeuble commented in the German press that the economic recovery would be a 'long road' ahead. He stressed that Italy needed to lower its debt as it has been avoiding this since the 1990s. He reiterated the German govt view that Europe could not solve its crisis in 'one go'
- German Coalition MP reiterated the view that Germany should not bring forward ESM payments without participating countries
- BOE Trends in Lending Report noted that bank Long term funding markets were challenging in Q4 and higher funding costs fed into corporate loan pricing. Write-offs were stable in Q4 and arrears were seen stable but might pick up in late 2012
- Spain to maintain its 2012 budget deficit target of 4.4% to GDP (refutes earlier press reports that Budget Minister Montoro stated that the country might miss its 2012 deficit target.
- Portugal PM Coelho commented that it must continue with bailout plan despite market uncertainty
- Poland Central Bank's Chonja-Duch commented that Polish 2011 GDP was seen at 4% or higher and that the recent December output was positive. She noted that the Polish Central Bank should keep interest rates steady through March. The Zloty currency was still in an appreciation trend with EUR/PLN at 4.0 seen reflecting fundamentals (currently at 4.30)
- Austria Debt Agency (AFFA) stated that it would skip the planned auction on Feb 7th due to recent syndicated debt sale of 10-year and 50-year bonds
- France President Sarkozy commented that the Euro Zone still faced danger and stressed that swift action was needed from Greece to stem crisis. All must be done to avoid military conflict in Iran and all must stop buying Iranian oil (appeals to both China and Russia)

Currencies:
- The USD gained over the course of the European morning with some concerns over the looming EBA capital raising plan deadline. Cautious comments from German Finance Minister Schaeuble also weighed against the recent euphoria of the European debt auctions.
- The EUR/USD approached the 1.30 handle in late Asian trading before succumbing to selling pressures with Middle Eastern names cited. EUR/JPY cross was above the 100 level in late Asian and was around the 99.60 as the NY morning approached
- The GBP currency was mixed in the session. There were no surprises in the Retail sales data but the back month was revised lower. The GBP/USD was at 1.5460 ahead of the NY morning, softer by 20 pips from the Tokyo open

Political/ In the Papers:
- Telegraph's Ambrose Evans-Pritchard looked at the recent rise in Portugal's bond yields and credit default swaps (CDS) and attributed some of the rise in yields to forced selling after S&P cut the country's rating to junk. Also, cited concerns that Portugal's fiscal cuts could negatively impact the country's growth, like in Greece.
- Citigroup Europe economist Jurgen Michels, expected Portugal's economy to contract by 5.8% in 2012, which is more pessimistic than the government's forecast. Portugal might not be able to significantly lower its debt levels, unless it implemented a "sizeable" haircut; Expected a haircut of 35% at the end of 2012 or in 2013.
- European officials have ruled out forced haircuts for Portuguese bondholders. Portugal's public debt was about 113% of GDP, while its total debt (including private sector debt) was 360% of GDP. Suggested the high levels of private sector debt in Portugal could make the banking system vulnerable to deleveraging

***Looking Ahead***
- (GR) EU/IMF/ECB Troika chiefs to arrive in Athens
- (MX) G20 Vice Finance Ministers meet in Mexico City
- 7:00 (CA) Canada Dec Consumer Price Index M/M: -0.2%e v +0.1% prior; Y/Y: 2.7%e v 2.9% prior; CPI Index: No est v 120.9 prior
- 7:00 (CA) Canada Dec CPI Core M/M: -0.2%e v +0.1% prior; Y/Y: 2.2%e v 2.1% prior
- 8:00 (PL) Bank of Portugal releases monthly Economic Indicators Report
- 8:00 (PL) Poland Dec Core Inflation M/M: 0.2%e v 0.3% prior; Y/Y: 3.0%e v 3.0% prior
- 8:30 (CA) Canada Nov Wholesale Sales M/M: 0.5%e v 0.9% prior
- 10:00 (US) Dec Existing Home Sales: 4.65Me v 4.42m prior
- 10:00 (MX) Mexico Central Bank Interest Rate Decision: Expected to leave the Overnight Rate unchanged at 4.50%
- 14:00 (AR) Argentina Nov Economic Activity Index M/M: No est v 0.3% prior; Y/Y: 7.5%e v 8.1% prior
- 16:00 (CO) Colombia Nov Trade Balance: $60Me v $103.2M prior
- 18:00 (IT) Italy PM Monti visits Tripoli, Libya

Saturday
- (US) Republican South Carolina Primary

Sunday
- (FI) Finland holds first round of Presidential Elections
- (DE) German Chancellor Merkel to meet IMF Lagarde

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.

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TradeTheNews.com European Market Update: Euro encounters profit-taking following recent rally

Back to The Headlines
Share This Story: Friday, January 20, 2012 5:47:16 AM TradeTheNews.com European Market Update: Euro encounters profit-taking following recent rally***Economic Data***
- (GR) Greece Nov Current Account: -€2.5B v -€1.5B prior
- (RU) Russia Narrow Money Supply Narrow w/e Jan 16th(RUB): T v 7.15T prior
- (EU) ECB: €3.0B borrowed in overnight loan facility v €3.3B prior; €420.9B parked in deposit facility vs. €395.3B prior
- (DE) Germany Dec Producer Prices M/M: -0.4% v +0.1%e; Y/Y: 4.0% v 4.6%e
- (JP) Japan Dec Convenience Store Sales Y/Y: 4.1% v 7.5% prior
- (TH) Thailand Dec Customs Trade Balance: -$2.1B v -$1.4Be; Exports Y/Y: -2.0% v -10.0%e; Imports Y/Y: 19.1% v 5.3%e
- (HU) Hungary Nov Avg Gross Wages Y/Y: 6.0% v 5.4%e
- (TW) Taiwan Dec Industrial Production Y/Y: -8.2% v -6.6%e; Commercial Sales Y/Y: -0.5% v -0.8%e
- (TW) Taiwan Dec Export Orders Y/Y: -0.7% v -0.5%e (First decline in 2 years)
- (HK) Hong Kong Dec CPI Composite Y/Y: 5.7% v 5.6%e
- (NL) Netherlands Nov Consumer Spending Y/Y: -1.2 v -1.7% prior
- (IT) Italy Nov Industrial Orders M/M: +0.1% v -1.6% prior; Y/Y: -0.7% v -4.8% prior
- (IT) Italy Nov Industrial Sales M/M: 0.0% v 0.1% prior; Y/Y: 0.2% v 1.1% prior
- (UK) Dec Retail Sales Ex Auto Fuel M/M: 0.6% v 0.7%e; Y/Y: 1.7% v 1.7%e
- (UK) Dec Retail Sales (with Auto Fuel) M/M:0.6 % v 0.6%e; Y/Y: 2.6% v 2.4%e
- (ES) Spain Nov Trade Balance: -2.7B v -€3.5Be
Fixed Income
- (ZA) South Africa sold total ZAR800M in I/L 2022, 2028 and 2033 Bonds
*** SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM ***
***Notes/Observations***
- Greece pushes to reach agreement in Private Sector Involvement (PSI)with Monday seen as the pivotal day
- Today is the dealine for European bank to submit capital raising plans to EBA
- Jan China manufacturing PMI 48.8 vs 48.7 in Dec (third straight month of contraction)
- Taiwan Export order decline for the first time in 2 years
- China begins week long lunar new year holiday
Equities:
FTSE 100 +0.10% at 5747, DAX -0.30% at 6396, IBEX 35 -0.40% at 8572, FTSE MIB -0.30% at 15,617, SMI -0.40% at 6170
- European shares dipped during the session, presumably on profit taking, after a week of solid gains which culminated in a 5-month high on Thursday. US initial jobless claims fell to a 4-year low while in Europe, Greece is continuing its talks with private investors. Peripheral bond auctions were also successful despite recent sovereign downgrades.
- In individual names, Vodafone [VOD.UK] rose up to 1.8% after Indian Supreme court ruled it had no jurisdiction to tax Vodafone's 2007 acquisition of Hutchison Essar on its territory. Furthermore, it directed the government to return the money with a 4% interest and pay back Vodafone's deposit of INR25B. The tax liability could have been approx. €1.9B. On the other hand, Thyssenkrupp [TKA.GE] issued a profit warning even after refuting speculations that the company would do so during the week. Germany's largest steel maker expects its steel business earnings to be down y/y.
Speakers:
- BoE's Broadbent stated that he did not pre-commit to QE decisions and votes each month on stock of asset purchases. Gilt purchases speed not relevant to his QE decision. He noted that the downside risks had lessen slightly in past 6 months due to actions by central banks and had not seen what was most feared about the EU. He saw household income and growth to improve in H2 and the degree of fiscal tightening to ease. BoE to maintain GDP forecast of flat growth for both Q4, Q1 quarters as near term output looked slightly weaker but Q1 seemed marginally stronger.
- German Fin Min Schaeuble commented in the German press that the economic recovery would be a 'long road' ahead. He stressed that Italy needed to lower its debt as it has been avoiding this since the 1990s. He reiterated the German govt view that Europe could not solve its crisis in 'one go'
- German Coalition MP reiterated the view that Germany should not bring forward ESM payments without participating countries
- BOE Trends in Lending Report noted that bank Long term funding markets were challenging in Q4 and higher funding costs fed into corporate loan pricing. Write-offs were stable in Q4 and arrears were seen stable but might pick up in late 2012
- Spain to maintain its 2012 budget deficit target of 4.4% to GDP (refutes earlier press reports that Budget Minister Montoro stated that the country might miss its 2012 deficit target.
- Portugal PM Coelho commented that it must continue with bailout plan despite market uncertainty
- Poland Central Bank's Chonja-Duch commented that Polish 2011 GDP was seen at 4% or higher and that the recent December output was positive. She noted that the Polish Central Bank should keep interest rates steady through March. The Zloty currency was still in an appreciation trend with EUR/PLN at 4.0 seen reflecting fundamentals (currently at 4.30)
- Austria Debt Agency (AFFA) stated that it would skip the planned auction on Feb 7th due to recent syndicated debt sale of 10-year and 50-year bonds
- France President Sarkozy commented that the Euro Zone still faced danger and stressed that swift action was needed from Greece to stem crisis. All must be done to avoid military conflict in Iran and all must stop buying Iranian oil (appeals to both China and Russia)
Currencies:
- The USD gained over the course of the European morning with some concerns over the looming EBA capital raising plan deadline. Cautious comments from German Finance Minister Schaeuble also weighed against the recent euphoria of the European debt auctions.
- The EUR/USD approached the 1.30 handle in late Asian trading before succumbing to selling pressures with Middle Eastern names cited. EUR/JPY cross was above the 100 level in late Asian and was around the 99.60 as the NY morning approached
- The GBP currency was mixed in the session. There were no surprises in the Retail sales data but the back month was revised lower. The GBP/USD was at 1.5460 ahead of the NY morning, softer by 20 pips from the Tokyo open
Political/ In the Papers:
- Telegraph's Ambrose Evans-Pritchard looked at the recent rise in Portugal's bond yields and credit default swaps (CDS) and attributed some of the rise in yields to forced selling after S&P cut the country's rating to junk. Also, cited concerns that Portugal's fiscal cuts could negatively impact the country's growth, like in Greece.
- Citigroup Europe economist Jurgen Michels, expected Portugal's economy to contract by 5.8% in 2012, which is more pessimistic than the government's forecast. Portugal might not be able to significantly lower its debt levels, unless it implemented a "sizeable" haircut; Expected a haircut of 35% at the end of 2012 or in 2013.
- European officials have ruled out forced haircuts for Portuguese bondholders. Portugal's public debt was about 113% of GDP, while its total debt (including private sector debt) was 360% of GDP. Suggested the high levels of private sector debt in Portugal could make the banking system vulnerable to deleveraging
***Looking Ahead***
- (GR) EU/IMF/ECB Troika chiefs to arrive in Athens
- (MX) G20 Vice Finance Ministers meet in Mexico City
- 7:00 (CA) Canada Dec Consumer Price Index M/M: -0.2%e v +0.1% prior; Y/Y: 2.7%e v 2.9% prior; CPI Index: No est v 120.9 prior
- 7:00 (CA) Canada Dec CPI Core M/M: -0.2%e v +0.1% prior; Y/Y: 2.2%e v 2.1% prior
- 8:00 (PL) Bank of Portugal releases monthly Economic Indicators Report
- 8:00 (PL) Poland Dec Core Inflation M/M: 0.2%e v 0.3% prior; Y/Y: 3.0%e v 3.0% prior
- 8:30 (CA) Canada Nov Wholesale Sales M/M: 0.5%e v 0.9% prior
- 10:00 (US) Dec Existing Home Sales: 4.65Me v 4.42m prior
- 10:00 (MX) Mexico Central Bank Interest Rate Decision: Expected to leave the Overnight Rate unchanged at 4.50%
- 14:00 (AR) Argentina Nov Economic Activity Index M/M: No est v 0.3% prior; Y/Y: 7.5%e v 8.1% prior
- 16:00 (CO) Colombia Nov Trade Balance: $60Me v $103.2M prior
- 18:00 (IT) Italy PM Monti visits Tripoli, Libya
Saturday
- (US) Republican South Carolina Primary
Sunday
- (FI) Finland holds first round of Presidential Elections
- (DE) German Chancellor Merkel to meet IMF Lagarde 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.