Intraday Market Thoughts

Euro Struggles at 1.27 as Fitch, EU Meetings Loom

by Patrik Urban
Jan 11, 2012 13:23

Fitch's comments send Euro lower; German GDP at 3%; UK trade deficit widens; German and UK decent bond auctions; ECB deposit facility at another record high. Market turns to crude oil inventories and later to Beige book. Commodity FX steady across the board, led by the Kiwi, Norwegian Krone and Canadian dollar. Ashraf's latest Premium Intermarket Insights arguing for CAD crosses.

USD is higher across the board, European equities are lower by about 0.7%, relative strength losers are EUR and CHF.

USD surges higher in the last two hours on Fitch's comments that ECB must do more to prevent cataclysmic euro collapse.

On the data front, German annual GDP was 3%, lower from previous 3.7% suggesting stronger momentum than originally projected. However, considerable slowdown in 2012 and the possibility of a recession in Q1 is still probable. The annual budget deficit improved to -1% of GDP from previous -4.3% of GDP.

In the UK, visible trade deficit widened in November to GBP -8.64 bln from October's GBP -7.86 bln. Both lower exports (-1.5%) and higher imports (+1.1%) contributed. Imports included record purchases of medical chemicals and crude oil.

The bond market saw two decent auctions today. Germany sold EUR 3.153 bln 5 year bonds with the yield below 1% for the first time. The average yield was 0.9% from previous 1.11% and bid to cover improved to 2.8 from 2.1. UK sold GBP 3 bln of 2021 Gilt with lower average yield at 2.085% from 2.382% while bid to cover improved to 2.15 from 1.61.

As has become the norm these days, deposits at the ECB broke to a fresh record at EUR 485.9 bln from yesterday's EUR 481.9 bln.

Market volatility could increase today at 9:00 am when Atlanta FED president and alternate FOMC member Dennis Lockhart speaks on the US economy in Atlanta.

US data is limited today to crude oil inventories that are due at 10:30 am ET and are expected to decline to 0.9M barrels from 2.2M barrels. Given the recent strength in oil and higher CAD, the market impact could be stronger today than usual.

The FED will release its beige book at 2:00 pm.

EURUSD shorts hit all targets but Aussie longs and oil shorts were stopped out. The 2 USDCAD and 2 CADJPY remain in progress as well the gold and silver trades . Those Tuesday trades can be accessed here: Non subscribers can get a 1-week free trial here:


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