Intraday Market Thoughts

USD Extends Slide; Italian Auction Comes out Strong

by Patrik Urban
Jan 26, 2012 12:41

Greek negotiations continue; gold firmly above 1700, Italian auction results in a full take up; German Gfk improved; UK CBI sales dropped. Market turns to durable goods, new home sales and later in the session to NZ trade balance data. Euro Premium Intermarket Insight short is underway. Thursday's Premium Intermarket Insight is due before the London closing bell.

The USD is weaker across the board. European equities are gaining about 1% and relative strength winners are NZD and CHF.

The USD continues its decline that started yesterday after the FOMC meeting. Gold is trading nearly 70 USD above yesterday's low 1650 and silver trades firmly above the 33 level. EURUSD broke to 5 week high and reached 1.3170.

Greek debt swap negotiations will continue today after European finance ministers maintained that bondholders should take a bigger loss on their holdings. Should the uncertainty coming from these negotiations continue, the focus could shift in the days ahead away from the FOMC decision back to Greece which would likely see and end of the risk rally.

Italy reached the full target today as it sold EUR 4.5 bln worth of 2014 bond. The average yield fell to 3.763% from 4.833% but bid to cover declined to 1.714 from 2.24.

In other news, ECB deposits declined modestly on Wednesday to EUR 484.1 bln and MNI reports that the ECB is currently buying Portuguese bonds via the SMP. The 10 year yield trades right below 15%.

On the data front, German GfK consumer climate for February improved to 5.9 from 5.7 and CBI retail sales in the UK dropped sharply -22% in January from December's 9% growth. This is the weakest print since 3/2009.

December durable goods orders are due at 8:30 am ET and are seen lower at 2.1% from 3.7% (core orders should rise 0.9% from 0.3%). Jobless claims that are due at the same time are seen higher at 371K from 315K.

New home sales are due at 10:00 am and are anticipated to rise slightly to 321K in December from November's 315K.

The end of the US session is marked by New Zealand trade deficit that is expected to narrow considerably to NZD -47M in December from previous NZD -308M. Trade balance is due at 4:45 pm.


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