Intraday Market Thoughts

USD Hit by a Risk-on Monday, Awaiting EcoFin

by Adam Button
Jan 23, 2012 13:04

ESM and ESFS may run in parallel; Greek negotiations to continue; German bond auction results in lower yield; ECB deposits rose. Market turns to Canadian leading indicators and EconFin meeting. Risk-on-Mondays weighing on USD across the board. EURUSD regains $1.30. S&P500 futures at 1312.

When Asia opened, the USD gapped higher on the back of a no agreement on the Greek debt. Yet, since London traders got to their desks they have been selling the buck across the board. European equities are higher by 0.3% to 0.7% and the relative strength winners are NZD and CHF.

EURUSD moved higher on German budget spokesman Norbert Barthle comments that the ESM and ESFS could be run together. The common currency jumped 100+ points higher above daily low and trades right at 1.30 resistance.

Negotiations continue between Greece and private creditors and a draft proposal should be presented today at the Eurozone finance ministers meeting in Brussels. Topics for discussions will also include new budget rules and protection of the Eurozone countries from the indebted states.

Germany sold EUR 2.54 bln (EUR 3 bln target) worth of 1 year bond today with average yield falling to 0.07% from previous 0.346%. However, bid to cover fell to 2.2 from 4.3. Bond issuance in the Eurozone is expected to fall back this week to around EUR 9 bln from nearly EUR 30 bln last week. Focus will turn to Spain that will sell 3 and 6 months bills tomorrow.

In other news, the ECB deposits rose on Friday to EUR 491.78 bln from Thursday's EUR 420.9 bln which is still considerably below last Tuesday's record of EUR 528.18 bln; Croatians approved joining the EU as its 28th member during the weekend. EU members have to ratify the result and the entry is expected in mid 2013. The EU formally agreed on oil embargo against Iran.

The US session starts with Canadian leading indicators due at 8:30 am ET that are seen lower in December at 0.6% from November's 0.8% followed by Eurozone consumer confidence that is expected to improve marginally in January to -20 from previous -21.1.

There is no US data due today.


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