Intraday Market Thoughts

German Bundestag Approves Enhanced EFSF; Yet EURUSD Weaker

by Patrik Urban
Sep 29, 2011 12:16

German Bundestag approves EFSF; UK mortgage approvals rise; Eurozone confidence indicators all declined. Market turns to Jobless claims, pending home sales and Canadian RMPI and IPPI.

German Bundestag approved enhanced EFSF with 523 to 85 majority. The approval was largely expected despite strong opposition not only among Germans but also among Merkel's governing coalition. Surprisingly EURUSD fell upon the announcement from 3670s to 3630s.

In the UK, August Mortgage approvals increased due to record low mortgage rates to 52.4K from 49.6K in July which is the highest since 12/2009 and above expectations of 49.5K. Net Consumer credit has also risen to GBP 0.5 bln from previous GBP 0.3 bln.

Chatter about QE does not seem to end in the UK. MPC member Spence Dale said today that "MPC has tools to act if deterioration continues" and that he is "sure that QE would work again".

The situation in the Eurozone continues to worsen as various types of confidence indicators all declined in September. The Economic confidence declined to 95 from 98.4, Consumer confidence fell to -19.1 from -18.9, Industrial confidence declined to -5.9 from -2.7 and Services confidence dropped to 0 from +3.7. To make things worse, businesses across all sectors reported a plunge in new orders. Export orders fell as well, despite the weaker Euro.

In other news, Italy and Spain extended short selling ban on bank shares stating that the ban will be effective until conditions improve and the chairman of the Chinese sovereign wealth fund said that "China cannot be expected to buy high risk Eurozone debt without clear picture of debt workout".

The US session will start at 8:30 am ET with Jobless claims that are seen at 420K from last week's 423K. Final Q2 GDP is expected at 1.2% from an initial estimate of 1.0%

8:30 am ET also brings Canadian Raw Materials Price index that is seen lower at -1.9% in August from -1.2% in July and Industrial Product Price index that is expected to decline -0.4% from previous -0.3%.

Pending home sales are due at 10:00 am ET and are anticipated lower at -1.7% in August from previous -1.3%.


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