Intraday Market Thoughts Archives

It is not a new development for US GDP growth to be largely driven by a build- up inventories (+1.9% contribution is highest since Q1 2010) in contrast to weak contribution from real final sales (+0.80% is lowest since Q1 2011). If this is a signal to future growth prospects, then how will the ultra low yields-driven stock go on? Read rest of article: http://bit.ly/AC4zX7

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Greece PSI talks still ongoing; full take up in Italian auction; Swiss KOF declined, Eurozone M3 growth lower; Portuguese yields soar; ECB deposits decline. Key event is Q4 GDP followed by UoM consumer sentiment. We had 7 new Premium trades yesterday evening, with 4 charts on Gold, EUR, US crude and Eurozone spreads. Focus on EURUSD, ESH, CLF and gold.

The USD is weaker in the ongoing session. European equities are in the -0.2% to +0.3% range and the relative strength winners are NZD followed by AUD.

Even though negotiations on Greece PSI continue and a deal has not been reached yet, the EU commissioner Olli Rehn said today that an agreement will be accomplished very soon, either today or during the weekend. ECB's willingness to participate in the swap is still being discussed.

Italy had another solid auction today as it reached a full take up of EUR 11 bln. EUR 8 bln July 2012 BOT sold with average yield 1.969%, considerably lower compared to previous 3.251. However, bid to cover declined to 1.35 from 1.69.

Next week, Italy and Spain are looking to issue a debt worth of EUR 16 bln vs. EUR 10.1 bln this week.

On the data front, Swiss KOF leading indicator declined in January to -0.17 from December's 0.01. This is the 9th monthly decline in a row and the result is the worst since July 2009 and December M3 money supply rose in the Eurozone annually by 1.6%, somewhat lower compared to previous 2%.

With spotlight on Greece PSI talks and US QE3 hints, market participants are overlooking soaring Portuguese yields (5 year yields nearly 20% and 10 year yielded over 15% earlier today) and the chatter about the need for a second bailout. On Wednesday, the head of Portuguese industry confederation told Reuters that additional EUR 30 bln is needed.

ECB deposits declined to EUR 464.8 bln on Thursday.

The ECB president Mario Draghi will kick off the NY session today at 8:15 am when he delivers a speech at the World Economic Forum in Davos.

The key event will come at 8:30 am when Q4 GDP is due and is expected to improve to 3% from previous 1.8%. The GDP price index is seen lower at 2.0% from 2.6%

The last report of this week is final revision of January UoM consumer sentiment that is expected to be revised higher to 74.2 from initial 74.

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The yen erased all its recent losses on fixing demand and a minor short squeeze. Other majors are packed in a tight range with CAD as a minor laggard. Italy's auctions went well. Markets await The Draghi's speech and the alimportant advanced release of US Q4 GDP. 1st of our two Premium EURUSD longs hit all targets. We had 7 new Premium trades yesterday evening, with 4 charts on Gold, EUR, US crude and Eurozone spreads. Focus on EURUSD, ESH, CLF and gold.

Japanese news and data was relatively benign. CPI fell 0.1% y/y, as expected while December retail sales rose 2.5% compared to 2.0% expected. The BOJ minutes offered nothing particularly noteworthy.

PM Noda said he expects the BOJ to take bold action on the strong yen but those comments did nothing to stop the round of yen buying, which came without a clear reason. According to MNI FX Bullets, stop loss selling in USD/JPY and EUR/JPY was said to exacerbate heavy demand into the Tokyo fix.

Greek debt swap talks are set to resume with the sides said to be close to a deal. We will believe it when we see it.

Italy sold all of its EUR 11 bln target size in 6-month auctions, but with a slightly weaker bid-to-cover ratio at 1.35. The 10-year spread is 10 bps lower than the previous one at at +407bps.There was chatter that the ECB was buying Italian bonds ahead of the auction as part of its SMP program.

Spain Q4 unemployment rose to 22.9% from 21.5%.

Siwss KOF Economic Institute's leading index fell 0.18 points to -0.17 in January,vs an expected -0.1.

The Davos economic forum continues with Draghi slated to speak at 1315 GMT and many other market-movers as well.

EUR/USD and risk trades received a boost from positive US data on durable goods orders early in US trading. Overall orders climbed 3.0% compared to the 2.0% expected and November data was revised higher. Non-defense orders ex-air rose 2.9% versus the 1.0% consensus.

The figures put an upside bias into GDP figures due on Friday.

At the same time, economic news was salted with disappointments in jobless claims and new home sales. EUR/USD reached 1.3184 as European markets closed but drifted lower afterwards, finishing close to 1.3100.

The ECB and Greek creditors continue to debate about what to do with the 40B euros in Greek sovereign debt held by the ECB. Market participants believe the debt swap will go more smoothly, with less chance of a CDS trigger if the central bank accepts some losses.

Reuters reported that the ECB has ruled out taking any losses but that could set off a legal battle with other creditors. The ECB is split on how to proceed and may forgo its coupons in a bid to placate concerns.

Asia-Pacific Preview

Australia returns from holiday but China remains closed.

At 2330 GMT, Japan releases December CPI figures. The national figure is expected at -0.2% y/y after a -0.5% in November. Excluding food and energy, the CPI is expected to fall 1.1% y/y

RBNZ Governor Bollard signalled at the possibility of arate cut, while suggesting the RBNZ has pushed the timing of the next rate hike OCR following disruption to the post-earthquake construction. T

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Post-Fed US dollar selling subsided in North American trading as the ECB continues to wrangle with how it will deal with Greek bonds on its balance sheet. On the day, the yen was the top performer while EUR and USD lagged. Japanese annual CPI falls for 3rd straight month. 7 new Premium trades were added 4 hours ago, with 4 charts on Gold, EUR, US crude and Eurozone spreads. Focus on EURUSD, ESH, CLF and gold.

EUR/USD and risk trades received a boost from positive US data on durable goods orders early in US trading. Overall orders climbed 3.0% compared to the 2.0% expected and November data was revised higher. Non-defense orders ex-air rose 2.9% versus the 1.0% consensus.

The figures put an upside bias into GDP figures due on Friday.

At the same time, economic news was salted with disappointments in jobless claims and new home sales. EUR/USD reached 1.3184 as European markets closed but drifted lower afterwards, finishing close to 1.3100.

The ECB and Greek creditors continue to debate about what to do with the 40B euros in Greek sovereign debt held by the ECB. Market participants believe the debt swap will go more smoothly, with less chance of a CDS trigger if the central bank accepts some losses.

Reuters reported that the ECB has ruled out taking any losses but that could set off a legal battle with other creditors. The ECB is split on how to proceed and may forgo its coupons in a bid to placate concerns.

Asia-Pacific Preview

Australia returns from holiday but China remains closed.

Japan Dec core CPI -0.1%. Nov CPI showed the 3rd straight annual decline, at -0.2%. Japan 2011 average core CPI -0.3%.

RBNZ Governor Bollard signalled at the possibility of arate cut, while suggesting the RBNZ has pushed the timing of the next rate hike OCR following disruption to the post-earthquake construction. T

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The Fed's zero interest rate policy (ZIRP) indicated for another 2 years, ECB's 3-year Long-Term Refinancing Operations flowing for 3 years and the BoE's looming QE3 next month are gradually replacing debt fears and taking out the credit rating agencies out of the headlines. All this is fuelling markets despite no change in the debt/structural situation (US, Eurozone, UK). We have 7 new Here are the latest short-term Premium Intermarket Insights trades, with 4 charts on Gold, EUR, US crude and Eurozone spreads. Direct Access to these trades is here: http://ashraflaidi.com/products/sub01/access/?a=590 Non subscribers click here: http://ashraflaidi.com/products/sub01/

Greek negotiations continue; gold firmly above 1700, Italian auction results in a full take up; German Gfk improved; UK CBI sales dropped. Market turns to durable goods, new home sales and later in the session to NZ trade balance data. Euro Premium Intermarket Insight short is underway. Thursday's Premium Intermarket Insight is due before the London closing bell.

The USD is weaker across the board. European equities are gaining about 1% and relative strength winners are NZD and CHF.

The USD continues its decline that started yesterday after the FOMC meeting. Gold is trading nearly 70 USD above yesterday's low 1650 and silver trades firmly above the 33 level. EURUSD broke to 5 week high and reached 1.3170.

Greek debt swap negotiations will continue today after European finance ministers maintained that bondholders should take a bigger loss on their holdings. Should the uncertainty coming from these negotiations continue, the focus could shift in the days ahead away from the FOMC decision back to Greece which would likely see and end of the risk rally.

Italy reached the full target today as it sold EUR 4.5 bln worth of 2014 bond. The average yield fell to 3.763% from 4.833% but bid to cover declined to 1.714 from 2.24.

In other news, ECB deposits declined modestly on Wednesday to EUR 484.1 bln and MNI reports that the ECB is currently buying Portuguese bonds via the SMP. The 10 year yield trades right below 15%.

On the data front, German GfK consumer climate for February improved to 5.9 from 5.7 and CBI retail sales in the UK dropped sharply -22% in January from December's 9% growth. This is the weakest print since 3/2009.

December durable goods orders are due at 8:30 am ET and are seen lower at 2.1% from 3.7% (core orders should rise 0.9% from 0.3%). Jobless claims that are due at the same time are seen higher at 371K from 315K.

New home sales are due at 10:00 am and are anticipated to rise slightly to 321K in December from November's 315K.

The end of the US session is marked by New Zealand trade deficit that is expected to narrow considerably to NZD -47M in December from previous NZD -308M. Trade balance is due at 4:45 pm.

Holidays in China and Australia made for a very quiet Asia-Pacific session with all the majors within 15 pips of the New York close. AUD is a slight outperformer while USD lags. The European session may also be quiet with German GfK consumer sentiment and an Italian debt sale as highlights.

Markets are consolidating after the wave of dollar selling and gold buying following the FOMC decision. In Asia, the lone indicator was December Japanese corporate service prices, which rose 0.1% compared to the flat reading expected.

Comments from former BOJ deputy Iwata drew headlines. He said the finance ministry should allow the BOJ to create at $643B fund to buy foreign bonds in order to devalue the yen. Iwata is working on a panel on national strategy but Fin Min Azumi has signaled he is reluctant to embrace the plan.

European traders will continue to focus on Greek debt negotiations and developments in other PIIGS nations. Merkel hosts Spanish PM Rajoy in Berlin.

At 0700 GMT, GfK releases German consumer confidence for February. The consensus estimate is for no chance from the 5.6 reading in January. Risks are to the upside with recent sentiment data beating expectations.

At 1000 GMT, Italy hopes to raise up to 5 billion euros in two-year debt. Two-year yields have fallen to 3.65% after opening the year at 5%. The most recent auction posted a 4.85% yield but the market will be expecting something at least 100 bps lower.

Both EURUSD trades hit all targets, 1 short is in progress. Both

USDCAD longs are in progress (one of which missed final target by 2 pips), and so is the oil short which missed the final target by 10 cents). Both ESH are in progress as are the 2 AUDNZD trades. Our USDJPY short and gold shorts were stopped out For more details on these trades, click here: http://ashraflaidi.com/products/sub01/access/?a=589 To subscribe, pls click here: http://ashraflaidi.com/products/sub01

The US dollar tumbled after the FOMC while NZD picked up some gains on a less-dovish statement. AUD and CHF were the best performers while USD and JPY lagged. Australia is closed along with China on Thursday. The highlight is Japanese corporate service prices. 2 See the latest progress on our Premium trades below. 2 EURUSD longs hit all targets, while the one short has kicked in. More details on rest of the trades is found below.

The main takeaway from the Fed meeting is that rates are likely to stay low for a longer period than expected and that QE3 has grown more likely.

The Fed said the subdued outlook for inflation is likely to warrant exceptionally low levels for the federal funds rate at least through late 2014. The previous statement indicated low rates until at least the middle of 2013.

Growth was downgraded this year and next as well. The forecast for 2012 was lowered to 2.2%-2.7% from 2.5%-2.9% in November. In 2012 the range was lowered to 2.8%-3.2% from 3.0%-3.5%.

The dollar tumbled upwards of 100 pips on most crosses with EUR/USD jumping to 1.31 from 1.2950. Gold surged $50 to $1710 a five-week high.

On the positive side, the unemployment was lowered slightly.

The market is sensing some additional monetary easing in the form of MBS purchases. Bernanke said there is a case for more easing if inflation remains below target for an extended period and employment progress is slow. The Feds inflation forecast is 1.4%-1.8% this year and 1.4%-2.0% in 2013.

In a historic step, the Fed unveiled an inflation target of around 2% in its first ever goal-and-policy statement. The informal target had always been seen slightly lower.

Another first came with anonymous FRB forecasts. Three of 17 members see hikes in 2012; 3 more in 2013; 5 in 2014.

The RBNZ held rates at 2.50% as expected but expectations for a cut in the second half of the year were dialed back. Now, market participants are talking about hikes later in the year. NZD/USD hit a 10-week high of 0.8190 after the release.

With China and Australia closed for holiday, the Asia-Pacific session could be very quiet. The focus stays on New Zealand with the 2330 New Zealand business PMI. At 2350, Japan releases the December corporate service price index. Expectations are for a 0.1% y/y decline.

Both EURUSD trades hit all targets, 1 short is in progress. Both

USDCAD longs are in progress (one of which missed final target by 2 pips), and so is the oil short which missed the final target by 10 cents). Both ESH are in progress as are the 2 AUDNZD trades. Our USDJPY short and gold shorts were stopped out For more details on these trades, click here: http://ashraflaidi.com/products/sub01/access/?a=589 To subscribe, pls click here: http://ashraflaidi.com/products/sub01

German IFO improves and bund auction results in lower yield. UK GDP contracted boosting QE speculation. Market turns to pending home sales, FOMC (statement and press conference see below) and RBNZ.

The USD is currently losing a part of the gains it made earlier during the session. European equity indices are losing about 1% and the biggest relative strength losers are EUR and NZD.

German Ifo data for January surprised to the upside as business climate rose to 108.3 from 107.2 and the expectations component rose to 100.9 from 98.6. Positive news from Germany continued as it sold EUR 2.458 bln worth of 2042 bunds today (target EUR 3 bln). The average yield declined to 2.62% from 2.82% and cover improved to 2.1 from 1.1.

However, the sentiment turned negative and the EUR sold off after MNI reported that hopes of a successful Greece deal are falling which increases the risk that the ECB would take a loss on its Greek debt holdings. The ECB allotted nearly EUR 20 bln in 3 month LTRO today.

In the UK, Q4 GDP contracted -0.2% from +0.6% q/q (0.8% from 0.5% y/y). Larger than expected contraction combined with yesterday's dovish comments from BOE governor Marvyn King are likely to boost QE speculation. MPC meeting minutes showed unanimous rate decision and some members stated again that further QE was likely needed. BBA mortgage approvals rose in December to 36.2K from 34.8K. GBP first weakened across the board but quickly recovered losses and trades at 1.5575 against the USD.

The US session starts today at 8:15 am ET when the ECB president Mario Draghi participates in a panel discussion about Europe's outlook.

The first release of the day is pending home sales that are expected to drop -0.6% in December after solid 7.3% growth seen in November.

FOMC SCHEDULE:

12:30 EST, 17:30 GMT:

Federal Open Market Committee decision

14:00/19:00

Federal Reserve published FOMC participants, federal funds rate projections for the first time, accompanied by updated quarterly, economic assumptions.

14:15/19:15

Chairman Ben Bernanke holds news conference to present the FOMC's current economic projections.

The FOMC will keep rates below 0.25% and release its statement at 12:30 pm and the press conference will follow at 2:15 pm. Given the recent fundamental improvements, especially in the labor market, the commission is unlikely to start hinting new QE at present but will stick to its "exceptionally low fed funds rate through 2013" forecast. Today will be the first time when the FOMC will announce its interest rates projections which are likely to be traders' main focus.

Later in the session at 3:00 pm, the RBNZ will announce its rate decision and release its statement. Rates are expected to stay at 2.5%.

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The US and Australian dollars are the top performers so far on Wednesday after Obama unveiled plans to boost US manufacturing and Australian core inflation rose more than expected. UK fourth quarter GDP is the major event of European trading with IFO data and the BOE minutes as other highlights. Monday night's 14 new trades are gradually kicking in as market activity nears today's FOMC announcement.

The State of the Union address largely focused on taxation for the wealthy, as expected. Otherwise, Obama proposed ending tax breaks for companies that move jobs overseas and cutting tax rates for manufacturing. He also revisited the idea of an infrastructure stimulus program. On energy, he promoted the development of natural gas.

Market reaction has so far been tepid but the US dollar is generally higher.

The Australian dollar is the top performer as AUD/JPY hit the highest since Nov 1 after Q4 CPI. The trimmed mean, Australias measure of core inflation, climbed 2.6% y/y beating the 2.4% consensus. Although headline inflation was softer than expected, the market will now be reluctant to fully price in a rate cut at the Feb 7 RBA meeting.

The yen is broadly weaker after Japan posted a larger than expected trade deficit in December as exports missed expectations. Annual numbers also $32B deficit, the first since 1980. Expect this data point to gain more prominence in the months ahead.

At 0900 GMT, Germany releases January IFO data with small improvements expected in all the indexes. The risks are certainly to the upside after several recent positive surprises in sentiment data.

At 0930 GMT the focus shifts to the UK for Q4 GDP figures. The consensus is for a 0.1% q/q contraction. Estimates range from -0.7% to +0.2% but any miss will cause large ripples in GBP. At the same time, the minutes of the most recent BOE meeting will be released.

Later, Germany sells 30-year bonds and Monti is scheduled to address the Italian Senate on the outcome of the Ecofin meetings.

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Obama and Australian CPI on Deck, Euro Stationed Above at $1.30

The euro fell to 1.2954 in early US trading only to storm back at the European close, finishing the day at 1.3022. GBP led and JPY lagged. Asia-Pacific trading will be busy with Australian CPI, Japanese trade balance and the State of the Union address. Monday nights Premium trades were aimed at previewing Tuesdays action as well as Wednesday into the FOMC decision.

Euro losses came as the IMF downgraded its global growth forecast to 3.3% from 4.0% three months ago but optimism about Europe turning a corner continues to build.

The IMF is leaning on the ECB to take some losses on Greek bonds. So far the ECB has insisted on full repayment while asking private lenders to swallow losses.

Canadian retail sales increased 0.3% in Nov compared to the 0.4% expected. We are cautious because if US trends were any indication, late-November sales simply pushed spending forward and Dec numbers will be soft.

The S&P 500 ended a five-day winning streak, falling 0.1% to 1314 but those gains were easily erased when Apple announced astounding profits in Q4.

Japan is expected to announce its sixth monthly trade deficit of the year when it releases December data. Yen sentiment is beginning to shift toward the negative and long-term JPY shorts are compelling. The 2011 calendar year will be the first annual trade deficit for Japan in 30 years. Expectations are for a 170B yen in December and we may see a slight JPY reaction to the figures.

At 0030 GMT, the highly-anticipated Q4 Australian CPI figures will be released. The OIS market is pricing in an 80% chance of a 25bps cut on Feb 8 and there could be a major swing based on this data. Expectations are for a +0.2% q/q reading and +3.3% y/y. The trimmed mean is expected +0.5% q/q and +2.4% y/y. The Australian dollar could easily move 50 pips on this release in the event of a miss.

Pres Obama delivers his State of the Union speech at 0200 GMT. The main theme will be taxes, which is not a particularly market-moving topic. Although the market had a short fling with US long term debt issues in the summer; that sentiment has passed. We will be looking for comments on spending, specifically any type of stimulus that will pump up near term growth.

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Eurozone industrial orders fell but PMIs improved; German PMIs also stronger. UK public net sector borrowing declined; solid Spanish auction. Market turns to Canadian retail sales while awaiting news from EconFin. 1st of 2-day FOMC meeting starts today. Monday nights Premium trades are mostly in progress, and are relevant into Wednesday evenings FOMC decision.

EURUSD holds above $1.30 after extending as high as 1.3060s earlier. USD is weaker against the GBP and firmer against JPY, CAD and AUD. Major European equities are losing nearly 1% and the relative strength winner is GBP.

Eurozone industrial orders fell -1.3% in November after 1.5% growth seen in October, January PMI manufacturing printed 48.7 from 46.9 and PMI services improved to 50.5 from 48.8. German January PMI manufacturing rose to 50.9 from 48.4 and PMI services grew strong 54.4 from 52.4. Despite the improving January data EURUSD could not rally and continues to trade right above the 1.30 level.

UK public sector net borrowing reached GBP 10.8 bln in December which is a narrower deficit compared to November's GBP 15.1 bln.

Spain sold EUR 2.51 bln worth of bills today (target EUR 1.5-2.5 bln). Results are solid as yields declined and bid to cover rose. One indication that the European periphery carry trade is not as widely employed as some believe are ECB deposits that continue to be elevated and on Monday were virtually unchanged compared to Friday at EUR 490.5 bln.

Today marks the second day of the Eurozone finance ministers meeting. Markets will be on a lookout for news and rumors of progress on the ESM-EFSF bailout mechanism and developments with the ongoing Greek debt talks. Formal offer on Greek bond swap should be announced on 2/13.

The US session starts at 8:30 am ET with Canadian retail sales that are seen lower in November at 0.3% from previous 0.7% (core sales lower at 0.2% from 0.7%) followed by Richmond manufacturing due at 10:00 am which is expected to rise to 6 in January from December's 3.

CHF volatility could increase at 11:15 am when SNB governing member J. P. Danthine speaks in Zurich. Heavy stops on EURCHF below 1.2050 and "massive" stops below 1.20 are reported. The OECD said today that the SNB should weigh benefits of FX intervention. GBP could experience erratic moves at 3:00 pm when BOE governor Mervyn King speaks in Brighton.

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The Bank of Japan maintained the status quo but forecast negative growth for the current fiscal year. Risk trades are slightly lower heading into the European session with JPY leading and AUD lagging. European newsflow will be heavy with the ongoing EcoFin meetings, European PMIs, UK public finances and several debt auctions as highlights. 14 new trades are posted from Monday night.

The BOJ lowered its forecast for the year ending in March to -0.4% from +0.3%. Along with the forecast, policymakers say they are expecting a pickup later in the year as exports rebound. For the following fiscal year, the forecast was lowered to 2.0% from 2.2%. Rates were held in a range from 0-0.10% and QE was left at 55 trillion yen.

In India, the central bank also held rates unchanged but lowered the reserve ratio by 50 basis points..

The euro will continue to be a slave to debt-swap rumors and reports in the upcoming session. EU finance ministers continue to meet in Brussels so there will be plenty of fodder. Journalists will be keep to dig up more information on a potential dual bailout scheme that includes both the ESM and EFSF.

.

Earlier his morning, German flash Jan services PMI beat expectations, coming out at 54.5 from Decembers 52.4, while flash manuf PMI regained 50.9 from 48.4. In France, flash Jan manuf PMI slipped to 48.5 from 48.9, but services rose to 51.7 from 50.3.

At 0900 GMT, the European manufacturing and services PMIs will be released. The manufacturing survey is expected at 47.3 versus 46.9 prior; services 49.0 vs 48.8 prior.At the same time, the Netherlands sells 2yr and 30yr debt.

At 0930 Spain will sell 3-month bills. Debt markets outside of Portugal have improved considerably in 2012 and the risks around this sale are minimal compared to last week. At the same time, UK public sector net borrowing expected 12.1B in Dec vs 15.2B in Nov. This numbers always present a risk for GBP but there may be a greater likelihood of gains due to the recent GBP underperformance.

Finally, at 1000 GMT, European industrial new orders are expected to fall 2.7%.

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Germany is discussing a plan that would allow the EFSF and ESM to exist in tandem in exchange for tighter fiscal rules, according to reports. The euro was the top performer on Monday while USD lagged. The Bank of Japan decision is the highlight of Asia-Pacific trading. 14 new premium trades are issued moments ago (3 EURUSD, 3 USDCAD, 2 AUDNZD, 2 S&P500 futures, 2 gold, 2 US crude)

Headline risk is heightened with European finance minister meeting in Brussels early this week. The FT reported that Merkels coalition is considering the dual bailout funds if strict prohibitions against deficits are unveiled. Shortly after the report, German officials issued denials but the euro held on to most of its gains.

EUR/USD climbed above 1.30 for the first time since Jan 4 on signs of progress in Greek deficit talks. But early in Asia-Pacific trading those hopes were dealt a setback on reports that European finance ministers have rejected a proposed deal. Several leaders are insisting on a deal that will bring debt-to-GDP below 120% by 2020.

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The politicians must eventually take the best deal they can get. Hopes for Greece to emerge unscathed in 2020 under any realistic deal are nearly nil. The strain of austerity and the political instability it brings will ensure growth is well below projections.

This is likely another negotiating tactic. Greeces finance ministry has pegged Feb 13 as the deadline for the haircut deal. Expect brinkmanship until the final days.

Asia-Pacific Preview

With China and other nations closed for the week for holidays, the market should be quiet until Europe wakes up. At 2300 GMT, Australian November conference board leading index. There is no expectations and the prior was +0.6%. At approximately 0500 GMT, the Bank of Japan renders its rate decision. Rates will remain unchanged at 0.10% and there are no expectations for new policies. There was considerable talk and recommendations for long-term JPY shorts circulating Monday. The case is certainly compelling.

ESM and ESFS may run in parallel; Greek negotiations to continue; German bond auction results in lower yield; ECB deposits rose. Market turns to Canadian leading indicators and EconFin meeting. Risk-on-Mondays weighing on USD across the board. EURUSD regains $1.30. S&P500 futures at 1312.

When Asia opened, the USD gapped higher on the back of a no agreement on the Greek debt. Yet, since London traders got to their desks they have been selling the buck across the board. European equities are higher by 0.3% to 0.7% and the relative strength winners are NZD and CHF.

EURUSD moved higher on German budget spokesman Norbert Barthle comments that the ESM and ESFS could be run together. The common currency jumped 100+ points higher above daily low and trades right at 1.30 resistance.

Negotiations continue between Greece and private creditors and a draft proposal should be presented today at the Eurozone finance ministers meeting in Brussels. Topics for discussions will also include new budget rules and protection of the Eurozone countries from the indebted states.

Germany sold EUR 2.54 bln (EUR 3 bln target) worth of 1 year bond today with average yield falling to 0.07% from previous 0.346%. However, bid to cover fell to 2.2 from 4.3. Bond issuance in the Eurozone is expected to fall back this week to around EUR 9 bln from nearly EUR 30 bln last week. Focus will turn to Spain that will sell 3 and 6 months bills tomorrow.

In other news, the ECB deposits rose on Friday to EUR 491.78 bln from Thursday's EUR 420.9 bln which is still considerably below last Tuesday's record of EUR 528.18 bln; Croatians approved joining the EU as its 28th member during the weekend. EU members have to ratify the result and the entry is expected in mid 2013. The EU formally agreed on oil embargo against Iran.

The US session starts with Canadian leading indicators due at 8:30 am ET that are seen lower in December at 0.6% from November's 0.8% followed by Eurozone consumer confidence that is expected to improve marginally in January to -20 from previous -21.1.

There is no US data due today.

Meetings continue but no deal on a Greek haircut appears to be imminent as Greece welcomes Troika leaders and asks for another bailout tranche. NZD is the early leader with EUR trailing. The events to watch in Europe are the Ecofin meetings and Eurzone consumer confidence. A few of late Thursday's Premium trades remain in progress, including those cautious longs in EUR & gold.

The euro fell to 1.2850 at the open but has clawed back most of its losses and is trading at 1.2900 on continuing belief that a Greek deal will get done.

Markets are thin to begin the week due to Lunar New Year holidays in China and elsewhere. Chinese markets will be closed throughout the week so developments in Japan, Australia and New Zealand (the RBA meeting is Thursday) will get special attention this week.

Australian producer prices showed lower-than-expected inflation pressures, climbing 0.3% in Q4 compared to the 0.5% consensus. Considering the close correlation between Aussie & PPI & CPI, Wednesdays CPI reading will have major implications for the razon-thin February RBA decision.

At 0900 GMT, finance minister from around the Eurozone will discuss the latest developments in the sovereign crisis at the Ecofin meetings. Headlines surrounding Greece, the ESM bailout fund and new fiscal rules will be front-and-centre. Data is light in Europe (and the United States). The lone indicator of note doesnt come until 1500 when January Eurozone consumer confidence figures are released. The consensus call is for an improvement to -20 from -21.1.

A few trades from Thursdays Premium Intermarket Insights remain in progress, including cautiousl longs in EURUSD and gold. Direct Access to these trades is found here: http://ashraflaidi.com/products/sub01/access/?a=585 To subscribe, click here: http://ashraflaidi.com/products/sub01/

Euro opens lower in Asia after creditors failed to reach an on cutting Greeces debt by ahead of Mondays meeting of Eurozone finance ministers. AUD and GBP were Fridays top performers while EUR and CAD lagged. Fridays CFTC data showed euro shorts creeping higher once again. EUR and CAD fall, Euro shorts edge to fresh record.

Creditors and Greek negotiators were close in reaching a deal that would cut the net long-term value of bonds by at least 65%. Although the head of the creditors group, Charles Dallara did leave Athens, he said discussions were ongoing and changes were possible. Since a deal was priced in, the lack of agreement pushed EURUSD below 1.29 in early Asia trade.

Meanwhile in Friday, the Canadian dollar slumped on diminished expectations for Bank of Canada rate hikes after December inflation figures fell well short of expectations. Headline CPI fell 0.5% in the month compared to the -0.2% expected; core CPI missed by a similar margin.

The trend in Canadian inflation has clearly slowed. Although policymakers continue to express concerns about high household debt and overvalued housing prices due to low interest rates, the absence of inflation will force them to keep rates unchanged for the remainder of 2012.

US existing home sales increased 5% in the month but fell just shy of expectations. The S&P 500 was flat at 1314.

CFTC Commitments of Traders

The data is through the close on Tuesday so its not a surprise that EUR shorts continued to expand. Unless we see a turnaround in EUR fortunes early next week, its probable that euro shorts will diminish in next weeks data.

EUR shorts increased 2K to -158K

GBP shorts increased 4K to -42K

JPY longs fell 1K to +59K

AUD longs increased 1K to +54K

CAD unchanged at -29K

NZD longs increased 4K to +9K