Monday 23 January 2012

MARKET VIBRATIONS: DYNAMIC INTRADAY NEWS COMMENTARY

OVERALL RISK: bullish
US EQUITIY FUTURES: Slightly bearish
CURRENCY WINNER/LOSER: +NZD, -GBP
1010 GMT French Presidential election frontrunner Hollande is talking tough on banks, pledging if elected to separate investment activities from other activities as well as ban them from tax havens. He has also proposed a new Franco-German treaty to increase cooperation. Geopolitics has dominated headlines this morning with the German Foreign Minister pledging to increase EU pressure aimed at stopping funding that the EU suspects is being used to develop nukes.
0853 GMT EURUSD has rallied strongly above 1.2900 and is now at 1.2930. Sources are saying Middle Eastern buyers are behind the move. German Foreigm Minister Westerwelle is now speaking in Brussels, says Iran sanctions are aimed at cutting funds for nukes, adding that EU will agree to sanctions. NYMEX is volitile on Iran developments. Bonds are seeing some strength ahead of the EU summit with EMU peripheral 10-years looking better.
0745 GMT Greek PSI update: reports are saying bondholders have made their final and "maximum" debt swap offer to the EU and IMF. Italy's Monti and ECB's Draghi have voiced a desire to see the ESM expanded by 100% to EUR 1tln. SNB quashes EURCHF speculation, saying will defend 1.2000 peg with "utmost determination." French BusCon indicator for January comes in at 91, versus expected 95 and previous 94.
0645 GMT In European trade this morning, commodity currencies continue to be strong. The Asian session saw some comments saying that Italy wants an increased EU bailout fund, as well as a vote by Croatia to join the EU. Keep heads up for German and French auction results later today, as well as the EU FinMin meeting.

FOREX: Euro Debt Crisis in Focus as Finance Ministers Meeting Looms 

The Eurozone debt crisis remains in focus as traders look to a meeting of the currency bloc’s finance ministers today for details of the much-anticipated “fiscal compact” aimed at introducing structural reforms to restore confidence and rein in borrowing costs ahead of a larger EU leaders’ summit next week. Also on the agenda is a final agreement on the degree of private-sector involvement (so-called “PSI”) in the Greek bailout. The agreement on a 50 percent haircut for the country’s creditors hashed out in October now looks like it may unravel.

The newswires point to a loose agreement whereby private creditors would accept losses of as much as 65-70 percent on their holdings of Greek debt but the particulars of a bond swap exchanging outstanding paper for new longer-dated maturities to help the country finance its immediate obligations remain elusive. If the talks fail, Greece may yet face a disorderly default that threatens to throw credit markets at large into turmoil. Indeed, a PSI agreement is vital to releasing a tranche of funding from the second EU/IMF bailout for the beleaguered country needed to cover €14.5 billion in debt maturing in March. The main point of contention is reportedly the coupon rate assigned to the new bonds.
Against this backdrop, France and Germany will tap the markets to sell €7.3 billion and €3 billion in shorter-term debt, respectively. Paris will be selling 91-, 168- and 350-day bills while Berlin will offer 12-month paper. As usual, traders will keep an eye on prevailing yield and bid-to-cover readings following the auctions for a reading on the degree of solvency stress in the markets. On the data front, a quiet European docket is likely to put the spotlight on the Richmond Fed Manufacturing Index reading due out in the US, where forecasts call for the highest print in 8 months.
Asia Session: What Happened
GMT
CCY
EVENT
ACT
EXP
PREV
0:30
AUD
Producer Price Index (QoQ) (4Q)
0.3%
0.4%
0.6%
0:30
AUD
Producer Price Index (YoY) (4Q)
2.9%
3.0%
2.7%
5:00
JPY
Supermarket Sales (YoY) (DEC)
-0.6%
-
-2.3%
Euro Session: What to Expect
GMT
CCY
EVENT
EXP
PREV
IMPACT
7:45
EUR
French Own-Company Production Outlook (JAN)
-
-2
Low
7:45
EUR
French Production Outlook Indicator (JAN)
-36
-37
Low
7:45
EUR
French Business Confidence Indicator (JAN)
95
94
Low
8:00
CHF
Money Supply M3 (YoY) (DEC)
-
7.2%
Low
8:00
CHF
Real Estate Index Family Homes (4Q)
-
398.6
Low
10:15
EUR
Germany to Sell €3B in 12mo Bonds
-
-
Medium
14:00
EUR
France to Sell €7.3B in 91-350 day Bills
Medium
15:00
EUR
Euro Zone Consumer Confidence (JAN A)
-21.4
-21.1
Medium
16:00
EUR
Euro Zone Finance Ministers Meet in Brussels
-
-
High
Critical Levels
CCY
SUPPORT
RESISTANCE
EURUSD
1.2883
1.2982
GBPUSD
1.5492
1.5620

 

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