Intraday Market Thoughts

2nd EU Summit Considered, New Lows for USDJPY

by Patrik Urban
Oct 21, 2011 14:17

Second summit on 10/26 announced; combining EFSF with ESM could provide EUR 940 bln in lending; German Ifo declines; UK public borrowing rises; Canadian CPI mixed. Market turns to three FOMC members speeches. USDJPY Hits new low at 75.82. NEW Premium Trades are up.

The USD is little changed since London traders got to their desks. The major currencies are likely to stay range bound as market players are unlikely to want to hold risk positions ahead of this Sunday EU summit. The complexity of the situation that Eurozone has to deal with is evident from the latest announcement that a second EU summit will take place on Wednesday 10/26.

Bloomberg reported that a plan to combine EFSF and the ESM to provide EUR 940 bln in funding is being considered and that France could lose its top rating given by S&P should the government borrowing rise due to ballooning deficit and bank recapitalization costs.


While 940 bln Euros is a significant amount, market participants could be unimpressed as rumors of 2 trillion Euros considered caused the Euro to spike higher just a few days ago.

On the data front, German Ifo Business Climate fell to 106.4 in October from previous 107.4 and the Expectations subindex fell to 97 from 97.1. In the UK, Public sector borrowing increased in September to GBP 11.4 bln from GBP 10.9 bln.

Canadian CPI declined to 0.2% in September from 0.3% in August. However, core CPI ticked up to 0.5 from 0.4%. On annual basis CPI reached 3.2%.

There is no data due during the NY session. However, market volatility could increase during a three speeches that will be delivered today.

At 1:00 pm FOMC member and Minneapolis Fed president Narayana Kocherlakota delivers speech on monetary policy in Minneapolis. Q&A session is expected which often causes stronger market reactions than a prepared speech.

At 1:20 pm FOMC member and Dallas Fed president Richard Fisher speaks about the economy in Dallas.

At 3:00 pm FOMC member and Fed's Governor Janet Yellen delivers a speech in Denver about the outlook for the US economy and economic policy.


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