Intraday Market Thoughts

Positive Eurozone Data Lifts EURUSD to 1.28

by Patrik Urban
Jan 17, 2012 12:59

Spanish bond auction solid; UK CPI sharply lower; German ZEW improved; Eurozone ZEW stronger. ECB deposits above half a trillion euro. Market turns to empire state manufacturing and Canadian securities transactions and BOC rate announcement. Fitch says Greece will have an orderly default.

USD is lower across the board in the ongoing session. Major European equity indices are higher by about 0.9% to 1.6% and relative strength winners are NZD and AUD.

Another solid bond auction results were seen today as Spain sold EUR 4.88 bln (EUR 4-5 bln target) worth of bonds. 1/2013 bond sold with average yield 2.049%, considerably lower from previous 4.05% with higher bid to cover at 3.55 from 3.14 and 6/2013 bond sold at 2.399% from 4.226%.

Meanwhile, Fitch said a Greek default was imminent and that "We have said for a long time that we don't think this PSI is the way to go and we would treat it as a default. It clearly is a default, however they try to spin it"

In the UK, headline annual CPI fell sharply to 4.2% in December from previous 4.8% which is the biggest fall since 4/2009 caused by lower price of petrochemicals and clothing. Core print declined to 3% from 3.2%. EURGBP is gaining on the news trading firmly above 0.83 from today's low at 0.8277.

On the European data front, German ZEW economic sentiment index improved considerably to -21.6 in January from -53.8 in December and current situation component picked up to 28.4 from 26.8. Eurozone ZEW economic sentiment index improved to -32.5 from -54.1 and annual CPI declined to 2.7% in December from 2.8%.

The ECB deposit facility breached above half a trillion on Monday as deposits rose to EUR 501.93 bln from Friday's EUR 493 bln.

The NY session will start at 8:30 am with Empire state manufacturing index that is expected to increase in January to 10.8 from previous 9.5.

Canadian data include international securities transactions that are due at 8:30 am and are seen higher in November at CAD 6.97 bln from October's CAD 2.03 bln. The impact may be muted as traders will await the BOC rate decision at 9:00 am. It is widely expected that the BOC will hold rates steady at 1%.

GBP volatility is likely to increase at 1:30 pm when MPC member Adam Posen speaks in London.


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