Italian Chaos vs Stable Euro

Italian borrowing costs hit a 3-week high and are set to have their first rising month after 4 straight monthly declines on PM Montis resignation announcement; Greek buyback extended; Eurozone Sentix investor confidence improved and German trade surplus fell. Risk events include Canadian housing starts and BOE King speech. Both of the Pre-EURUSD trades remain in progress.

USD greenback is lower against GBP and JPY but trades only a little changed against the rest of the majors. European equities are losing nearly 1%.

Focus turned to Italy as ex-PM Silvio Berlusconi proclaimed his plans to return to politics and current PM Mario Monti announced that he would tender his resignation after the 2013 budget is passed. Italian 10 year yield soared over 7.5% today and reached 4.89%. BTP yields are set to have their first rising month after 4 straight monthly declines. Meanwhile, Italian industrial production fell in October 1.1% after declining 1.3% in September and Q3 GDP was confirmed at -0.2% q/q and -2.4% y/y.

Greece extended the buy-back offer until tomorrow after falling short of the EUR 30 bln target, Bloomberg reports. The aim is to reach the full face value as Greece was given EUR 10 bln to conduct the buyback.

On the data front we learned that Eurozone Sentix investor confidence improved in December to -16.8 from November's -18.8 and that German trade surplus fell in October to EUR 15.8 bln from prior 16.9 bln as exports grew only 0.3% while imports rose 2.5%.

Data reports during the US session are limited to Canadian housing starts that are expected to decline marginally in November to 202K from previous 204K. There are no US data due today.

GBP could react to the BOE governor Mervyn King's speech at the Economic club in NY that is scheduled to begin at 12:15 am ET.

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