Intraday Market Thoughts

Spain Edges Toward Bailout, Latest Premium Insights

by Adam Button
Oct 17, 2012 1:03

The euro neared 1.31 on signals Spain could ask for bailout funds. The euro was easily the top performer Monday and started strong on Tuesday while CAD and NZD lagged. The Asia-Pacific calendar is light but the Presidential debate will add intrigue. Tuesday night Premium Insights are out, with focus on EURGBP. See details in final paragraph.

The euro jumped above 1.3050 on a Bloomberg report suggesting top German lawmakers were open to extending a precautionary credit line to Spain. Such a move may allow the ECB to purchase bonds without forcing Spain to accept the onerous terms of the ESM.

The euro rally stalled when one of the lawmakers told Reuters his comments about Spain were misinterpreted. The euro fell further, to 1.3014, when Greek domestic media reported that talks with the Troika had collapsed.

The twists continued, and the euro climbed back toward the daily highs when the IMF said significant progress had been made in Greek talks, although there are some outstanding issues. Finally, the euro raced close to 1.31 early in Asian trading after Moodys affirmed Spains credit rating.

The surprise move led to speculation that credit agencies have been tipped off about a Spanish bailout, something that seems unlikely in Europe, where secrets always leak.

US news was inconsequential for the market. CPI rose to 2.0% y/y compared to 1.9% expected but core numbers were softer. Industrial production was stronger than forecast but only due to a downward revision to the prior numbers. Citigroup CEO Pandit also quit (or was fired) in a surprise move.

The Canadian dollar was roundly weaker in a delayed reaction to the less hawkish comments from BOC Governor Carney that we wrote about yesterday.

The Asia-Pacific calendar is light ahead of Thursdays highly-anticipated GDP report. At 2330 GMT, Westpac releases its leading index for Australia. The prior reading was +0.4%.

The second US Presidential debate begins at 0100 GMT.

Tuesday night Premium Insights are out, with focus on EURGBP technical and the monthly breakout. Direct Access can be found here: NONsubscribers can join here:



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