Intraday Market Thoughts

EURUSD Back Below 1.30 as Appetite Pauses for Steam

by Patrik Urban
Jan 4, 2012 12:44

Eurozone CPI Slowed; German PMI services revised lower; Eurozone PMI revised higher. Overnight ECB deposits at a new record. German auction sees lower yield, UK construction PMI rose. Market turns to US factory orders.

The greenback is higher across the board in the ongoing session. The biggest losers today are CHF and NZD. Major European equities are lower by -0.6% to -1.5%.

After staying at 3% for the past three months, annual Eurozone CPI slowed in December to 2.8%. Other Eurozone news include German December PMI services that was revised lower to 52.4 from initial estimate at 52.7, Eurozone PMI services that was revised higher to 48.8 from 48.3 and Eurozone PMI composite which was also revised higher to 48.3 from 47.9.

Overnight deposits at the ECB reached a new record high on Tuesday at EUR 453.18 bln suggesting that banks do not want to lend to each other, partly due to fear of exposure to periphery debt and prefer to park their excess cash at the ECB. The use of the deposit facility that pays 0.25% has been elevated since August 2011.

Germany sold EUR 4.057 bln 10 year bonds, slightly below EUR 5 bln target. The average yield was lower at 1.93% from previous 1.98% and bid to cover improving slightly to 1.3 from 1.1. EURUSD did not respond to the announcement and continued to trade around 1.3030.

In the UK, construction PMI rose to 53.2 in December from 52.3 in November and considerably above expectations of 51.7. Mortgage approvals reached the highest since 12/2009 in November at 52.9K, marginally higher from previous 52.8K. On the release, EURGBP fell from 0.8345 to 0.8320.

The only data release for the US session is November factory orders which are seen higher 1.9% from previous contraction -0.4%. The data is due at 10:00 am ET.


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