Intraday Market Thoughts

More Greek Elections Ahead, China Cuts RRR, Latest COT

by Adam Button
May 14, 2012 1:31

Failed negotiations among Greek political parties suggest another election is the most likely consequence. China cut its reserve requirement by 50 bps, making the 3rd cut over the past 9 months following Fridays disappointing industrial production and retail sales. The best reading on US consumer sentiment since 2008 sprung risk trades on Friday but the moves faded on concerns about Greece and Spain. The Australian dollar was the laggard on the day and the week, while the Canadian dollar made good gains on the April jobs report. The weekly CFTC data showed a 63% is US dollar longs. None of Thursdays euro shorts in Intermarket Insights were filled but we shall await the rebounds following Sunday declines.

Greeces top-three political parties have all failed to form coalition governments and the mandate has been to the President who will try his best to cobble together a consensus. That looks increasingly unlikely as Syriza continues to poll strongly.

Spain announced it will pump 15 billion euros into banks while forcing them to create real estate bad banks. The funds fall short of the 30-50 billion euros analysts say will be required to loosen Spanish credit markets. There is also growing talk of LTRO3 to assist Spanish banks.

The euro and risk-sensitive AUD climbed midway through US trading on Friday as the University of Michigans consumer sentiment survey climbed to 77.8 compared to 76.0 expected. Its the highest since June 2008 and showed that Americans are feeling better about the current situation while remaining cautious about the outlook.

In Canada, the outlook is also improving as the economy added 58.2K jobs compared to the 7K expected. The details of the report were sterling with the gains all in full-time and private sector work. USD/CAD fell nearly a full cent after the report but the gains later faded.

The jobs report showed why CAD is the darling of the speculative market. CAD longs at 60K -- down slightly from 70K last week but still the markets favoured currency.

EUR net shorts hit -143,984 contracts versus the prior week's net short of

-106,990 contracts. This contrasts to the record net euro shorts of

-171,347 contracts seen January 2012. The former darling, AUD, saw its longs halved to 25K from 52K. EUR shorts surged to 143K from 107K while yen shorts were scaled back to 41K from 50K. The pound remains a favorite at 25K compared to 16.5K a week earlier.

Thursdays Intermarket Insights include trades on EURUSD, AUDUSD, USDCAD and gold. Direct access click here: Non subscribers click here:



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