Euro Nears Wedge, S&P Downgrades US Banks

ECB fails to fully sterilize bond purchase, US consume confidence hits 4 mth high, S&P downgrades US banks, upgrades Chinese banks, Premium Trades in progress. EURUSD nearing the top of the wedge identified in today's Premium trades

The EFSF's top official Klaus Regling said EFSF will borrow short-term funds in December, but not to expect investors to commit substantial funds any time soon. He added that investment funds could help banks recapitalize. The EFSF shall insure 20-30% of sovereign bonds and will be able to leverage resources up to EUR 250bn, starting early 2012.

Rumblings of ECB QE

There were some questions as to whether the ECB may be finally embarking on quantitative easing on Tuesday when the amount it from the banking system in a 7-day liquidity-absorbing operation intended to sterilize the ECB's bond purchases fell short of the EUR 203.5 billion total spent in bond buys since program began in May 2010. The ECB drained only EUR 194.1986 bln.

Whether a full-fledged QE from the QE would be positive or negative for the euro remains to be seen. Our assessment is that it will be mainly negative for the single currency, especially as it is combined with the likelihood of further rate cuts.

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US Nov consumer confidence hit a 4-month high of 56 from 40.8, exceeding expectations of 44. Whether the jump was attributed to rushed holiday buying remains to be seen.

In Japan, preliminary Oct Industrial production rose 2.4% m/m from -3.3% and +0.4% y/y from -3.3%. The figures will be confirmed next month.

S&P cut the ratings of Bank of America Corp, Goldman Sachs, Citigroup, Morgan Stanley and Bank of Americas Merrill Lynch unit after it revised the criteria for worlds biggest lenders. Meanwhile, S&P upgraded 2 Chinese banks; Bank of China and China Construction Bank.

Ashraf Laidi