Intraday Market Thoughts

EUR at 1.30 as Spain Yields hit 6.15%, Retail Sales Next

by Patrik Urban
Apr 16, 2012 13:01

EURUSD declines to 1.30 as Spanish yields hit 6.17%; Swiss PPI declined and Eurozone trade surplus fell; sovereign issuance; Chinese yuan declined. Market turns to US retail sales, empire state manufacturing, TIC flows and business inventories.

Euro came under pressure immediately when Asia opened and the selling intensified further when European traders got to their desks. Once EURUSD triggered various option structures below 1.30 it started to consolidate. The tone remains heavy and retracements have been shallow.

Spanish yields hit a fresh high on th eyear at 6.15% on continued concerns about the banking sector and the budget deficit. Spanish 10 year yield reached 6.156% today while even two weeks ago it yielded 5.3%. The 10 year German-Spanish spread rose to 444 bps.

European data calendar was short today: Swiss PPI declined in March to 0.3% from 0.8% m/m (-2% from -1.9% y/y) and Eurozone trade surplus declined in February to EUR 3.7 bln from March's EUR 5.3 bln.

The bond market will continue to be in focus this week. According to MNI, the sovereign bond issuance is estimated at EUR 19.63 bln this week from EUR 14.4 bln last week. Focus will be on especially on Spanish debt auctions on Tuesday.

The first day of trading with the new 1% trading band, Chinese yuan declined 0.3% which would be comfortably within the old 0.5% band. Yuan closed at 6.3150 from Friday's 6.3030.

The US session starts at 8:30 am ET with March retail sales that are expected to decline to 0.4% from 1.1% (core sales to fall to 0.6% from 0.9%). Empire state manufacturing is seen lower in April at 18.1 from 20.2.

Canadian foreign securities purchases from February are due at 8:30 and should rise to CAD 4.23 from CAD -4.19.

Long term TIC flows are due at 9:00 am ET and are anticipated lower in February at USD 40.7 bln from USD 101 bln and February business inventories at 10:00 am should stay steady at 0.7%.

Market volatility could also increase at 12:30 pm when Cleveland FED president and FOMC member Sandra Painalto delivers a speech on economic outlook.


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