Intraday Market Thoughts

Euro Adds to Losses, Swiss Premium Piece

by Patrik Urban
Dec 12, 2011 13:15

Euro Deepens Sell-off S&P to decide on Ezone downgrades in coming days; German WPI lower; Swiss employment higher; Italy sells 1 year bill with lower yield; French auction later today. The US session brings federal budget deficit data. See out extensive Premium piece on the CHF & one way to exploit franc weakness ahead of Thursdays quarterly SNB meeting.

Relatively tight ranges seen during the Asian session were broken when London traders got to their desks and started to buy the greenback. The USD is higher across the board and European equities are losing slightly less than 1%.

It seems that Friday's EU summit with its new treaty was quickly forgotten as traders continue to sell the common currency. EURGBP trades just a few points above the critical support given by November 10th low at 0.8485 and should this level be broken, the market would target the support zone around 0.8350 and in extension even 0.8150. On the back of the EURGBP selloff, GBPUSD jumped from 1.5540 to above 1.56.

S&P head in France Carol Sirou said that the S&P will decide whether to downgrade Eurozone countries in coming days so it is reasonable to assume that as long as the rating downgrade looms the willingness to open long Euro positions will be slim.

Latest Premium piece on trading CHF Fundamentals & Technicals ahead of Thursdays SNB meeting is found here:

The European economic calendar was light today. German November WPI printed 4.9% y/y, marginally lower from previous 5% and Swiss employment level rose to 4.05M in Q3 up from previous 4.02M.

Italian treasury was able to sell EUR 7 bln in 1 year bills with 5.952% yield, slightly lower compared to previous 6.087% with bid to cover at 1.925. Despite the lower yield, EURUSD continues to trade heavy bellow 1.33. French bond auction is scheduled for later today and given the downgrade threat, the risks of higher yields and/or low demand are high.

The US data is limited to the federal budget deficit due at 2:00 pm which is expected to widen in November rather substantially to USD -138.5 bln from previous USD -98.5 bln.

CAD traders should pay attention at 1:10 pm when BOC governor Mark Carney delivers a speech on Canadian economic developments in Toronto and also at 2:10 pm when he holds a press conference.


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