Intraday Market Thoughts

USD Firms Ahead of EU Summit Deadlock

by Patrik Urban
Jun 27, 2012 13:42

Japan's lower house approves tax hike; German CPI still being collected; UK BBA mortgage approvals lowest in over a year; Italian auction and business confidence; Spain could hike VAT. US May durable goods orders rose 1.% after 2 down months, w/ 0.4% ex transport. pending home sales. Latest Premium Insights from Tuesday night includes new trades on EURUSD, USDJPY, GBPUSD and existing trades in gold and USDCAD. See more below.

USD firms ahead of the EU summit as concerns that the summit will fail to produce anything concrete and meaningful are mounting. Meanwhile, chancellor Merkel meets president Hollande today in Paris and German budget committee deliberates and votes on the ESM and the fiscal compact bills.

Moody's downgrade of 2 Austrian bank notes may cast doubt on German bank exposure.

Japan's lower house voted to double the sales tax from 5 to 10% by October 2015. If it is approved by the upper house, which is expected and becomes a law then it would be the first tax hike since 1997. JPY initially slightly weakened but later regained ground. USDJPY trades around 79.50.

German June CPI is still being collected and the result is due later today. Analysts expect a flat reading after a 0.2% decline seen in May. German import prices declined 0.7% in May after falling 0.5% in April.

UK BBA mortgage approvals declined in May to 30.2K from April's 32.1K which is the lowest since 04/2011 while net mortgage lending hit record low. GBP initially weakened but CBI realized sales that soared in June to 42 from previous 21 helped the currency to recover its losses. CBI sales grew at the fastest pace since 12/2010. GBPUSD trades around 1.5625 while EURGBP retraced towards 0.7995.

Italy reached its target value as it sold EUR 9 bln of 6 month BOT. The average yield rose to 2.957% from 2.104% and cover improved to 1.62 from 1.61. Italian business confidence increased in June to 88.9 from 86.6.

Spanish 10 year yield is little changed around 6.86% amid speculation that the VAT could be hiked for some items, removing them from the discounted tax rate. Meanwhile, May retail sales dropped 4.9% y/y.

US May durable goods rose 1.1%, better than the expected 0.5% following 2 straight down months. Pending home sales are due at 10:00 am ET and they are seen higher at 1.2% in May from previous -5.5%.

Tuesday evenings Premium Trades are posted in the following link: Non Subscribers click here:


Latest IMTs