Intraday Market Thoughts

Euro Stable Despite 7% Spain Yields as US Data Suggests QE3

by Patrik Urban
Jun 14, 2012 14:14

Lower US CPI and higher jobless claims argue for more Fed QE. SNB keeps rate steady; Eurozone CPI declines; Spanish 10 year yield hit 7% despite EURUSD stabilization. hits euro highs; Italian auction; OPEC. Focus turns to CPI, jobless claims and Canadian NHPI and capacity utilization. Last night's Premium Intermarket Insights titled "Maintaining Risk-on" are discussed in the last paragraph of this IMT.

USD is slightly lower against all majors in the ongoing session. Major European equities are trading within -0.4% to +0.1% and the relative strength winner is NZD that recovered all of the losses from yesterday's NY session.

The SNB left the 3 month libor target range unchanged between 0% and 0.25% and reiterated that it will continue to enforce the CHF cap with utmost determination. It also noted that it is ready to take further measures as it expects a significant slowdown in 2012 and sees exceptionally high risks for the economy. As these comments were hardly surprising, the CHF barely responded.

Eurozone CPI in May was in line with expectations at 2.4% from 2.6% y/y (core CPI unchanged from April at 1.6%). Q1 labor cost rose 2% y/y.

Spanish 10 year yield hit 7% which is the highest level since the launch of the common currency. Rumors that the ECB was checking prices helped to push the yield marginally lower to current 6.93%.

Italy reached a full take-up as it was able to sell various bonds totaling EUR 4.5 bln. The average yields rose and cover declined. Italian 10 year yield pushed to 6.34% before easing to 6.23%.

WTI is consolidating in a narrow range ahead of the OPEC meeting that starts in Vienna today. The output ceiling is likely to be maintained as concerns about global growth outweigh calls for cuts to stem falling prices, Bloomberg reports.

US US May CPI -0.3%, core CPI +0.2% for +1.7% y/y (vs exp 1.8%) and +2.3% y/y respectively. Jobless claims +6k to 386k vs expected 377K.

Canadian new housing price index due at 8:30 am is expected to rise 0.4% from 0.3% and capacity utilization is seen higher at 80.9% from 80.5%.

GBP volatility could increase at 2:00 pm when the BOE governor Mervyn King delivers a speech in London.

We added fresh longs to EURUSD & GBPUSD in last nights Premium Intermarket Insights after Mondays traders hit targets. Same goes for gold, which is nearing the 1635 target. More detail on these and other trades & gold multitime frame charts, get direct access here:: Non subscribers can join here:


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