Intraday Market Thoughts

Moody's Warns, Euro Drops, Gold Slammed

by Kyle Morrison
Dec 12, 2011 9:23

Europe agrees to follow original treaty rules with tweaks, UK isolation in focus as Cameron faces UK parliament, French and Italian T-bills auction awaited, Greece set to discuss new bailout plan. Gold drops by 29 to 1680, nearing our Thursday Premium shorts.

EURUSD drops below 1.33 while markets are in the red after Moodys warned that Eurozone sovereign rating were under pressure in the absence of decisive Initiatives following the EU Summit. This comes at a time when markets await the verdict from S&P following last weeks massive warning downgrade.

Last weeks summit saw Europe agree to follow the rules of the original stability and growth pact of the Maastricht Treaty, with a few tweaks to impose sanctions as well as oversight of the books in the event that countries breach them. These rules include budget deficits of no more than 3% of GDP and overall debt to GDP to be below 60% of GDP.

The only problem with that is that most EU countries, including Germany with 82% debt to GDP ratio, are already in breach of these rules and as such these will have to be delayed until such time as the existing budgets are brought into line.

The downside to that is that any wholesale budget cuts across Europe will also cut growth as well at a time when growth is already non-existent.

UK PM David Cameron is set to speak to the House of Commons today in the wake of the political fall-out from Fridays EU Summit. With nervousness amongst his Liberal Democrat partners about last weeks events becoming ever more vocal there is some concern that this could increase tensions within the coalition.

In the wake of Fridays events in a key test France is set to auction 6.5bn of 91, 182 and 308 T-bills in a week that could see it lose its triple A rating from Standard and Poors after last weeks warning that it could start cutting ratings if no agreement was reached at the weekend.

In Italy its three biggest unions are set to stage a 4 hour strike in protest at the latest austerity measures, while at the same time the government is set to auction 7bn of 365 day T-Bills.

Greece starts talks with the troika of its creditors today on a new bailout package, nearly five months after the original plan was discussed in July.

Gold drops by 29 to 1680, nearing the double shorts from Thursdays Premium shorts. For direct access, click here: Non subscribers can go here:


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