Euro Stabilizes, Awaiting US Home Sales

Rumor of a Greek deal; UK retail sales rose; German PPI declined; ECB deposits rose; Canadian CPI drops. Market turns to Canadian wholesale sales and US existing home sales. Latest Premium trades (issued last night) are modestly bullish euro. They also include 4 charts on euro and US crude oil.

USD is stronger against all majors with the exception of NZD that is also the relative strength winner in the ongoing session. Major European equities are lower by about 0.5%.

MNI reports a market rumor of a Greek agreement for its PSI deal. The entire Greek debt should be replaced by 30 year bond with coupon rising from 3.1% to 4.75%. Final terms should be announced later today by the IIF. Somewhat surprisingly, EURUSD has not risen on the news and continues to hover right above 1.29.

In the UK, retail sales rose 0.6% in December from previous -0.8% which translates to 2.6% from 0.4% y/y. The growth was attributed to record sales of clothes and footwear that despite the slowing economy grew 1.8% m/m and reached highest level since 1988. GBPUSD trades around 1.5450 after reaching a high at 1.5497.

German PPI declined to 4.0% on annual basis in December, a considerable decline from November's 5.2% (-0.4% from +0.1% m/m). As anticipated, slower growth is slowing pipeline pressure so consumer inflation is likely to fall in the coming months. EURUSD fell on the news from 1.2970 to 1.2890 but has recovered and trades firmly above 1.29.

ECB deposits rose to EUR 420.9 bln on Thursday but this amount is still significantly lower compared to record high EUR 528.18 bln hit on Tuesday.

Consumer inflation in Canada fell in December to -0.6% from previous 0.1% m/m (2.3% from 2.9% y/y). Core fell to -0.5% from +0.1% (1.9% from 2.1% y/y). This is the biggest fall in six months. USDCAD jumped from 1.0135 to 1.0160 on the news.

The New York session will start at 8:30 am ET with Canadian wholesale sales that are seen slightly lower in November at 0.8% from October's 0.9% followed by US existing homes sales at 10:00 am that are expected to show an increase in December to 4.65M from previous 4.42M.

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