Intraday Market Thoughts

Risk Rally Lacks Follow-Through

by Patrik Urban
Aug 6, 2012 12:41

FX consolidate but equities remains buoyed; complaint with the German constitutional court extended; Eurozone Sentix investor confidence lower; UK Halifax HPI declined; bond issuance and periphery yields. Premium Insights will be released later this evening.

Germanys DAX-30 Index is attempting its 7th straight weekly gain, which would be its longest winning streak since Apr/May 2009.

Friday's risk rally has seen no follow thru in FX as most currencies are consolidating their gains against the USD. GBPUSD is the exception as it fell back to 1.5546. European equity indices are higher by about 0.5% and the relative strength winner is JPY while GBP is the weakest.

The complaint with the Germany's constitutional court against the ESM now also includes opposition to any banking license for the ESM, German press reported today. German president Joachim Gauck awaits the court ruling that is scheduled for September 12th before signing the ESM and fiscal compact into a law.

On the data front, Eurozone Sentix investor confidence declined further in August to -30.3 from July's -29.6 which was still above expectations of a fall to -31 and UK Halifax HPI fell to -0.6% in July from previous 0.8%. EURUSD retraced to 1.2355, GBPUSD declined to 1.5546 which helped to push EURGBP to fresh recent highs at 0.7944.

Eurozone sovereign bond issuance this week is expected at mere EUR 4.5 bln compared to last week's EUR 16.1 bln. Only Germany and Belgium are scheduled to come to the market. As far as bills, issuance is seen around EUR 10.5 bln vs. EUR 10.2 bln issued last week. Netherlands, France, Greece and EFSF are scheduled to come to the market, MNI reports. Spanish and Italian 10 year yields are trading marginally lower around 6.78% and 6.04%.

There are no reports due during the US session. The only event will begin at 9:00 am ET when the FED chairman Bernanke delivers a speech via satellite titled "Economic measurement" to a conference in Boston.


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