Italy Getting its Act Together & Additional Premium Chart

Sentiment bounced on Thursday after Italy took steps to form a new government and Greece named a Prime Minister. CAD and EUR were the top performers with NZD and AUD lagging. The Asia-Pacific calendar is but a report about JPY intervention is circulating. A new chart on OIL/EUR and S&P500 has been added to Thursday's Premium trades.

A new government is seen in Italy within days and it is rumoured to be led by former European Commissioner Mario Monti. Negotiations are ongoing to pass austerity measures by the weekend and Berlusconi is expected to step down immediately afterwards.

The news pushed Italian 10-year yields back below 7% and sparked a modest rebound in risk appetite. Sentiment was further lifted when former ECB member Papademos was sworn in as Greeces new PM. EUR/USD bounced 150 pips to 1.3650 early in US trading before settling at 1.3600.

Volatility kicked higher and risk assets sold off when S&P errantly sent some clients a message indicating Frances sovereign rating had been placed on review for a downgrade. It took nearly two hours for a retraction but sentiment never fully recovered. Persistent rumours about sovereign downgrades, plans to remove countries from the euro area and political discord also undermined whipsawed traders.

Economic data was light as US initial jobless claims fell to 390K from 397K and beat the 400K expected. The Canadian dollar outperformer after an unexpected trade surplus and a rally in oil to $98.

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