Intraday Market Thoughts

Euro Nears October Lows on Ratings Worries, Gold -50

by Adam Button
Dec 13, 2011 0:12

Sovereign downgrade talk and disappointment from the EU Summit spurred a selloff in risk assets Monday that pushed EUR/USD below 1.32. USD was the top performer, followed by JPY; EUR and AUD lagged. A series of second-tier indicators will be released in the Asia-Pacific session. The CHF-related trades in Mondays Premium Intermarket Insights are already moving in the right direction.

The euro tracked steadily lower since the open of trading for the week, slipping as low as 1.3163. A break below the early October low of 1.3144 would place EUR/USD at the lowest in almost a year.

Moodys and Fitch sees increased pressure on European ratings. Moodys said the results were not decisive and Fitch forecast a significant economic downturn in the continent which will hurt ratings.

The S&P 500 touched a Dec low and closed down 1.49% to 1236. Italian 10-year yields rose 30 bps to 6.53%.

Economic data was light. The US November deficit was $137B compared to the $150B consensus. We warned on Friday about the flakey nature of ECB bond-buying rumours and data released covering last week affirmed that the central bank was a miniscule player, buying just 0.635B of European debt last week, much lower than previous weeks.

Gold fell $50 intraday to the lowest since October despite the sovereign worries. Market talk suggests year-end repositioning and/or liquidation.

Mondays extensive CHF analysis shows the various ways of playing the franc peg ahead of Thursdays SNB policy meeting. Non-subscribers can click here:

Asia-Pacific Data

Japans tertiary industry index rose 0.6% in Oct vs an expected +0.4% m/m from previous -0.7%. At 0030 GMT, quarterly Australian housing starts will be released. There is no consensus and this risk is essentially one way for AUD. A continued deterioration like the 4.7% q/q fall in the second quarter will spark selling while a rebound will be met with skepticism. At the same time, the NAB business confidence survey will be released.


Latest IMTs