Intraday Market Thoughts

Commodity Currencies Surge, More Meetings in EU

by Kyle Morrison
Jan 11, 2012 10:23

Merkel to meet Monti in more EU meetings as Fitch warns on Italy, Sarkozy to meet Lagarde, Greek PSI, UK trade balance set to rise in November. Commodity currencies rally across the board, led by the Kiwi, Norwegian Krone and Canadian dollar. See Ashraf's latest Premium Intermarket Insights arguing for CAD crosses.

Last nights meeting of IMF chief Lagarde and German Chancellor Merkel saw them discuss efforts to solve European debt crisis, situation in Greece and the Troika mission to Athens with respect to PSI. Later today Chancellor Merkel will meet Italian PM Mario Monti, in the wake if Fitchs comments yesterday that the fate of the euro will be decided at the gates of Rome, as it warned that the country faced the prospect of another downgrade by the end of the month.

Although Fitch suggested it may keep France triple A rating for now, Standard and Poors is still expected to follow up on its threat to remove its own France triple A rating as it did for USs last year.

President Sarkozy then takes his turn meeting IMF chief Lagarde as the two reacquaint themselves with the fiscal compact under discussion as well as growth and the proposal for the financial transaction tax.

The talks on the Greek PSI look set to rumble on with EU officials warning that haircuts could be imposed, however this would be problematic and would in all likelihood constitute a default with private bondholders holding out against haircuts in excess of 50%, as Greeces fiscal position continues to deteriorate.

UK November trade deficit rose to 8.6 from a revised 7.97 bln in October.

Germanys 2011 GDP growth came in at 3.0% from 3.7% in 2010.

Oil and gold hold firm, lifting NOK and CAD along with them even as risk appetite remains neutral to positive. Our positioning against AUDNZD has seen the pair lose over 300 pips and is slated for more losses.

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