Intraday Market Thoughts

EU Nears Eurobonds, US Consumer Confidence Awaited

by Patrik Urban
Jun 26, 2012 13:21

Cyprus requests aid; EU moves closer to common debt; German GfK rose; BoE's King comments; UK PSNB higher; Italian retail sales drop. Market turns to S&P Case Shiller and CB consumer confidence. Link to Ashrafs London Seminar this Saturday is below.

Euro remains inside 1.2480-1.2530 range despite the official request for emergency funding by Cyprus. The application was received only a few hours after Spain has submitted its request. EUR 10 bln is being considered for the EUR 17.3 bln economy and Cyprus is the 5th out of 17 Eurozone members that had to seek rescue aid.


At the beginning of the London session EURUSD moved higher on Reuters report that common debt and other forms of fiscal solidarity could be considered in the EU fiscal union. Rate rose to 1.2530 but quickly sold off back to 2480.

German GfK consumer confidence continues to defy the ongoing crises as the index rose to 5.8 for July from previous 5.7. However, economic expectations component dropped 16.6 points to 3 after increasing for three months back to back. EURGBP breached 0.8000 support and trades around 0.7988.

BoE governor King said during the Treasury committee hearings that a rate cut has not been ruled out and that bond purchases can provide bigger stimulus. He showed pessimism towards the Eurozone, while stating the UK is not close to a liquidity trap. The market is currently pricing in only 9% probability of a BOE cut on July 5th. UK public sector net borrowing soared in May reaching a GBP 15.6 bln deficit after 19.9 bln surplus a month earlier.

In other news: Swiss UBS consumption indicator fell in May to 1.05 from 1.37 and Italian retail sales dropped 6.8% in April from previous 1.5% on annual basis which is the sharpest fall in over 10 years.

Spain reached a full take up again, selling bills totaling EUR 3.08 bln vs. 3 bln target. However, average yields rose significantly and bid to cover declined.

The NY session starts today at 9:00 am ET with S&P Case Shiller HPI that is expected to decline 2.4% in April after falling 2.6% a month earlier followed by CB consumer confidence at 10:00 am which is seen lower in June at 63.8 from 64.9. Any reading below January's 61.5 is likely to be the lowest since 41 reached in October.



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