Considering Dual Funds, New Premium Trades are up

Germany is discussing a plan that would allow the EFSF and ESM to exist in tandem in exchange for tighter fiscal rules, according to reports. The euro was the top performer on Monday while USD lagged. The Bank of Japan decision is the highlight of Asia-Pacific trading. 14 new premium trades are issued moments ago (3 EURUSD, 3 USDCAD, 2 AUDNZD, 2 S&P500 futures, 2 gold, 2 US crude)

Headline risk is heightened with European finance minister meeting in Brussels early this week. The FT reported that Merkels coalition is considering the dual bailout funds if strict prohibitions against deficits are unveiled. Shortly after the report, German officials issued denials but the euro held on to most of its gains.

EUR/USD climbed above 1.30 for the first time since Jan 4 on signs of progress in Greek deficit talks. But early in Asia-Pacific trading those hopes were dealt a setback on reports that European finance ministers have rejected a proposed deal. Several leaders are insisting on a deal that will bring debt-to-GDP below 120% by 2020.

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The politicians must eventually take the best deal they can get. Hopes for Greece to emerge unscathed in 2020 under any realistic deal are nearly nil. The strain of austerity and the political instability it brings will ensure growth is well below projections.

This is likely another negotiating tactic. Greeces finance ministry has pegged Feb 13 as the deadline for the haircut deal. Expect brinkmanship until the final days.

Asia-Pacific Preview

With China and other nations closed for the week for holidays, the market should be quiet until Europe wakes up. At 2300 GMT, Australian November conference board leading index. There is no expectations and the prior was +0.6%. At approximately 0500 GMT, the Bank of Japan renders its rate decision. Rates will remain unchanged at 0.10% and there are no expectations for new policies. There was considerable talk and recommendations for long-term JPY shorts circulating Monday. The case is certainly compelling.