EU Summit Snubs Spain, Jobless Claims Rebound

Risk aversion climbed Thursday on indications the EU Summit will focus on a banking union, not aid for Spain. The US dollar was the best performer while the Canadian dollar lagged. The Asia-Pacific trading week winds down with comments from BOJ leader Shirakawa. Tuesday nights Premium Insights include 9 new trades and 4 trades in progress, alongside an emphasis on the confluence of support points across 5 segments of the Intermarket space. Cable longs hit all targets. We also have 5 new charts with a special technical focus on EURGBP.

The euro slide back to 1.3060 from 1.3120 in US trading as rumors that Spain will activate aid mechanisms were dashed. EU leaders huddled in Belgium but the focus of the meetings has shifted to a banking union, not the crippling debt and growth problems in the periphery.

Spains government is facing regional elections and is likely aiming to win support at home. The bond market has also turned in Spains favor with 10-year yields down to 5.34% indicating that Rajoy has time on his side.

In the US, the market got an answer to last weeks unusually strong jobless claims report it was a seasonal skew. This weeks number shot to 388K compared to 365K expected. The overall trend remains lower the market is cautious about trading around the release.

Similarly, the Philly Fed climbed into positive territory for the first time since April. The October reading was +5.7 compared to +1.0 expected. The key components of the report, however, were much weaker with expectations, employment and new orders all lower.

USD/JPY rallied to a fresh one-month high of 97.45 immediately after the Philly Fed and a WSJ report saying the BOJ will consider introduce fresh easing at the Oct 30 meeting, according to two unnamed sources. Governor Shirakawa may offer more hints in a 0635 GMT speech.

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-AB