Intraday Market Thoughts

Solid Spanish and French Auctions Lifted EURUSD Above 1.29

by Patrik Urban
Jan 19, 2012 12:31

Spanish and French solid auctions underpin the common currency; Eurozone current account deficit narrowed; ECB deposits fell considerably. Focus turns to CPI, jobless claims, housing data and Philly FED index.

USD is mixed in the ongoing session. It is stronger against NZD and JPY, unchanged against GBP and weaker against the rest of the majors. European equities are higher by about 0.75%.

Another strong bond auction came from Spain as it sold EUR 6.61 bln worth of bonds today (EUR target 3.5-4.5 bln). Average yields were generally lower compared to the previous auction.

Despite the recent downgrade, French bond auction nearly reached its EUR 8 bln target as France sold EUR 7.965 bln worth of bonds. The largest auction was for EUR 3.429 bln 2016 bond that averaged 1.89% yield, considerably lower from previous 2.82% with bid to cover improving to 2.12 from 1.68. Other yields and cover also improved.

Fundamental news from Europe was limited to current account deficit that narrowed in November to EUR -1.8 bln from previous EUR -6.6 bln.

In other news, ECB deposits dropped sharply on Wednesday to EUR 395 bln from Tuesday record high of EUR 528.184 bln and Italian PM Mario Monti announced a cabinet meeting for tomorrow that aims to approve plans designed to improve Italian competitiveness.

The US session starts at 8:30 am ET with annual CPI that is expected to decline in December to 3.1% from previous 3.4% while the annual core inflation is seen steady at 2.2%. Jobless claims should come back lower to 387K from previous rise to 399K.

Housing starts are seen steady in December at 685K while building permits are anticipated lower at 675K from previous 681K.

Canadian manufacturing sales due at the same time are seen higher at 1% in November from October's 0.8%.

Philly FED index is due at 10:00 am is expected to rise to 10.7 in January from previous 10.3.


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