Intraday Market Thoughts

USD Fades as Stocks Extend Towards 5-Month Highs

by Patrik Urban
Jan 10, 2012 14:06

Greek auction results in a lower yield but bid to cover declined as well. Focus shifting to Ireland; ECB deposits at record highs again. Canadian housing starts surprise on the upside, prompting further bids in the oil-fuelled CAD. US IBD/TIPP economic optimism and wholesale inventories are both due at 10 am EST. Tuesdays Premium trades are up.

Euro recovery continues and EURUSD breaks above 1.28. The greenback is broadly weaker. European equity indices gained around 2% and the relative strength winners are NZD and AUD.

In light of yesterday's Merkel/Sarkozy comments that the second bailout fund would not be released until an agreement regarding restructuring is signed, the market cautiously awaited Greek debt auction results. Greece was able to sell EUR 1.625 bln (only EUR 1.25 bln expected) of 6 month bills with 4.90% average yield (previous 4.95%). Bid to cover declined to 2.8 from previous 2.93. Markets will now shift focus to German auction tomorrow, Spanish auction on Thursday and Italian auction on Friday.

The deposits at the ECB continue to break records every day. The ECB reported that deposits increased to EUR 481.94 bln yesterday, significantly higher compared to weekend's EUR 463.6 bln.

Traders' attention is shifting to Ireland again as rumors that debt restructuring or a second bailout may be needed started to appear. Irish spreads are widening and IMF inspectors returned to Ireland to make sure the bailout conditions are adhered to. The European commission has said that aid plan is working and there is no point in debating another.

WTI, gold and silver enjoyed a considerable rise over the past few sessions. WTI pulled back to 102.65 after touching 103, gold trades near session highs around 1630 and silver soared nearly to 30. It currently trades around 29.70.

Canadian housing starts rose to 200K in December from 185K, prompting further bullishness in CAD, which is backed by surging energy prices.

US data includes January IBD/TIPP economic optimism index that is seen higher at 45.3 from previous 42.8 and November wholesale inventories that are anticipated to rise by 0.5%, lower compared to previous 1.6%. Both releases are due at 10:00 am.

The market could also react when Chancellor Merkel meets IMF's head Christine Lagarde in Berlin at 2:00 pm.

Tuesdays latest Premium trades include USDCAD, CADJPY and US crude. These can be accessed in NON-subscribers can click here to join:


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