Intraday Market Thoughts

EURUSD Under 1.28 After Mixed Italian Auctions

by Patrik Urban
Jan 13, 2012 13:13

EURUSD sells off after Italian auction resulted in lower yield but also lower bid/cover ratio; Eurozone trade surplus grew; ECB deposit facility at a record high again. Market turns to US and Canadian trade balance data and UoM consumer confidence. Details on latest Premium Intermarket Insights are below.

The recovery that started yesterday after successful Spanish and Italian auctions ran out of steam today as EURUSD sold lower to below 1.28. Surprisingly, the decline started right after Italy was able to reach its target and sell EUR 4.75 bln worth of bonds. The largest auction was EUR 3 bln 2014 BTP that resulted in lower average yield at 4.83% from previous 5.62%. However, bid to cover declined to 1.215 from 1.364. Perhaps, Fitch's threat of Italian downgrade that should be resolved by month's end stayed on traders minds.

European data was limited today to Eurozone trade balance that in November reached the highest surplus in nearly two years at EUR 6.1 bln from previous EUR 0.5 bln . Exports rose 3.9% while imports remained steady. Solid export growth could elevate fears of a severe downturn.

In other news, the ECB said that the deposit facility reached a new high at EUR 489.906 bln which is EUR 3 bln more than on Tuesday and MNI reports that ECB ex-president J. C. Trichet sought clearance to become the chairman of Bruegel institute, European think tank working in the field of international economics.

The New York session will kick off at 8:30 am ET with trade deficit that is expected to widen in November to USD -44.8 bln from previous USD -43.5 bln followed by University of Michigan consumer confidence due at 9:55 am that is seen higher in January at 71.5 from December's 69.9.

Canadian statistics office will release the latest trade balance data at 8:30 am with trade deficit likely widening to CAD -0.5 bln in November from previous CAD -0.89 bln.

Our Premium Intermarket Insights include 10 new trades on including EURUSD, AUDUSD, EURGBP and US crude, with existing trades in CADJPY, USDCAD, USDJPY and silver The trades are for Fridays Asia/EU/US sessions Non subscribers can get access here:


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