USDJPY at 2 Year Highs

JPY and USD weaken; more pressure on BOJ; Italian auction; lower EZ sovereign issuance in 2012 compared to 2013; UK BBA mortgage approvals rose. Market turns to jobless claims; consumer confidence and new home sales.

Europe returned from Christmas holiday break and pushed the greenback lower. EURUSD rose to 1.3275 and GBPUSD trades just a few points below 1.6200.

JPY continues to fall across the board after the newly formed government intensified pressure on the BOJ. PM Abe's position has been widely known. Now others are joining in – the finance minister Aso said that "the BOJ has been insensitive to the problem of deflation" and urged the MOF to change its attitude. Meanwhile, the economy minister Amari confirmed that he is working on a stimulus program.

The upswing in JPY pairs has been impressive and a retracement seems likely. Nevertheless, considering the prospects for more BOJ easing, buying on pull back is preferred. USDJPY trades around 85.75, EURJPY around 113.75.

Italy reached a full take up as it sold 6 month BOTs totaling EUR 8.5 bln. The average yield rose to 0.949% from 0.919% and cover weakened to 1.57 from 1.65.

MNI reports that Eurozone sovereign issuance for 2013 is expected to be lower around EUR 760 bln vs. EUR 840 bln in 2012 as budget deficits as well as redemptions are lower. Ireland and Portugal are anticipated to return to the bond market while Greece will remain excluded.

The sole item on the European calendar was British BBA mortgage approvals that rose in November to 33.6K from October's 33.1K. Analysts expected an increase to 34.6K.

The US session begins at 8:30 am ET with jobless claims that are seen slightly higher at 365K from previous 361K. Consumer confidence is due at 10:00 am ET and it is expected to decline in December to 70.3 from previous 73.7 while November new home sales are seen rising to 382K from prior 368K.