Intraday Market Thoughts

Euro Stabilizes Post-Slovak Vote, UK Jobs Data Next

by Kyle Morrison
Oct 12, 2011 8:48

Slovakia says No, but new vote may follow, Spanish and Italian bank ratings cut, UK unemployment data set to rise, Eurozone industrial production set to drop sharply, US Senate passes China currency bill, US FOMC minutes due. Today's Premium Intermarket insights are due at 10 GMT.

Euro looks beyond Slovakian parliaments rejection of the EFSF and rallies by a full cent to 1.3670s in early Europe. The likelihood remains that a second Slovakian vote will ratify the vote. Even if the vote is passed, it doesnt address the inadequate size of the EFSF required to cope with a spill over to Spain or Italy.

Spanish and Italian re-emerge in in the spotlight after a raft of downgrades from S&P and Fitch respectively. Standard and Poors cut counterparty ratings on Santander, BBVA and a raft of others as well as cutting Spain GDP forecast for 2012 by 0.5% to 1%. Fitch cut long term ratings on Intesa San Paolo and Monte di Paschi with a negative outlook.

The struggling British pound faces todays release of September unemployment, expected to increase to 8% from 7.9%, while jobless claims for September are seen at 24k, up from Augusts 20.6k rise. Yesterdays NIESR GDP figures for September came in at 0.5%, below the BoEs 0.7% forecast of the same.

Away from Slovakia and in the broader euro zone industrial production for August is expected to slide sharply by 0.8%, while the year on year number is expected to more than halve from 4.4% to 2.1%.

September French CPI this morning slowed to 0% m/m from 0.6% m/m, but was unchanged at 2.4% y/y.

The U.S. Senate voted last night to pass legislation aimed at pressing China to allow its currency to rise in value, sending the bill to the House of Representatives, where it could well be thrown out.

The Currency Exchange Rate Oversight Reform Act of 2011 allows the U.S. government to levy tariffs on products from countries found to be subsidizing their exports by undervaluing their currencies. This could be viewed badly in China and could be the opening shot in further exchanges between the two countries that could lead to a damaging trade war.

The main focus of the US session shall be publication of the latest FOMC minutes, which saw the Federal Reserve embark on the highly telegraphed operation twist.


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