Intraday Market Thoughts

Euro Boosted by Nowotny & More Fed Stories, Shrugs Downgrade

by Adam Button
Jul 26, 2012 0:16

The ECBs Nowotny mulled a banking licence for the ESM, sparking a rebound in sentiment. Egan Jones' downgrade of Italy deep into junk territory at CCC+ was ignored by the euro. The Australian dollar was the best performer while the pound struggled after GDP. In Asia, the RBNZ held rates and the BOJ governor speaks. Gold, Aussie & GBPUSD shorts hit all targets. A new set of Premium Insights will be issued on Thursday before to the US session. Another article by WSJ's Hilsenrath suggesting the Fed could take more action by end of summer also boosted sentiment.

The euro rallied above 1.2150 on Nowotnys comments but it may have been more of a reaction to five consecutive days of EUR/USD and EUR/JPY declines. Nowotny merely suggested that he saw arguments in favour of the approach but conceded that there has been no specific discussion about a banking licence at the ECB.

Rumors circulated about another LTRO next week but there was nothing to back it up.

The US economic calendar was bare but corporate earnings were solid, especially equipment maker Caterpillar, which had some upbeat comments on the global economy. The focus was mostly on Europe where Spanish and Italian 10-year yields fell back to 7.38% and 6.44%, respectively.

Ratings agency Egan-Jones downgraded Italy to CCC+ from B+ and there was chatter that the UK AAA-rating is vulnerable after the weak GDP report.

In Asia, the RBNZ held rates at 2.50%, as expected. There was some speculation about a dovish statement was it was relatively unchanged from last month and carried a neutral stance.

The calendar features Korean second quarter GDP at 2300 GMT. The numbers may offer clues into the strength of the global economy. At 2350, Japan releases the June corporate service price index; its expected flat y/y.

Twenty minutes later, BOJ Governor Shirakawa speaks. New options for easing may be discussed and anti-yen jawboning is likely.

A new set of Premium Insights are due on Thursday. 1 of the 2 EURUSD Monday shorts hit targets, with the other filled and in progress. US crude and USDJPY remain in progress . Gold, GBPUSD and AUDUSD hit all targets, while 1 of 2 USDCAD in progress, the other stopped out. DIRECT ACCESS click here: Non subscribers click here: A new set of trades will be issued later today.



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