Intraday Market Thoughts

Quiet Markets Await IFO, CBI

by Kyle Morrison
Dec 20, 2011 9:36

German IFO set to remain weak on the back of Europe concerns, Spain to sell T-Bills, UK Consumer confidence bounces back while retail sales could show slight improvement. RBA minutes show more worries over Europe spillover. Latest Premium trades for Tuesday are due ahead of the US session.

Sentiment remaining fragile after EU finance ministers made limited progress on bi-lateral IMF loans, with the UK saying it would only contribute as part of a wider global agreement, and only if other countries outside the EU are party to the plan. Ministers were also unable to agree on progress with regard to the ESM in the face of Finnish opposition to qualified majority voting.

Todays release of the latest German December IFO numbers on business climate and current expectations are expected to show further deterioration. The business climate index is expected to decline to 106 from 106.6, while current expectations index are expected to slip to 97 from 97.3.

German GFK consumer confidence is also expected to remain weak at 5.5, while producer prices are expected to slip back to 5.2%.

Spain is expected to sell up to 4bn worth of three to six month T-Bills, later today, after the new PM admitted that the Spanish economy was likely to miss its deficit targets in the fourth quarter due to ongoing pressures caused by the recession. The country is also expected to contribute an extra 14.5bn as part of the bi-lateral loan agreement to the IMF.

After todays IFO survey, focus shifts to Wednesdays new three-year long term refinancing operation or LTRO (maturity of January 2015) from the ECB. Consensus for the take up ranges between EUR 250-300 billion. Some estimates stand as high as EUR 500. It remains assumed that banks will use these funds reinvest in sovereigns debt to benefit from the yield differential or carry trade.

Todays CBI Dec retail sales seen improving to -14 from -19 in November. The UK consumer remains under the spotlight in the lead-up to Christmas after the latest Nationwide consumer confidence seen at 40 in Nov from 36 in October.

The minutes of the Reserve Bank of Australia's 0.25% rate cut showed a split over the decision as well as rising over concern the chill winds from Europe. Given that consumer confidence remains fragile the bank highlight the risks of a slowdown in China and a concern about a worsening jobs market. Even so the bank indicated that further rate cuts were unlikely in the near term unless the European situation deteriorated further noting that the Australian economy continued to show signs of growing.

In the US the latest November housing starts and building permits data is due out.

Our latest trades include 7 existing trades (2 EURJPY, 2 USDCAD, 1 AUDNZD, 2 gold), Both AUDUSD were stopped out, 1 EURUSD & 1 AUDNZD hit all targets, while none of the 2 silver trades were filled. Direct access to these trades is found here: Non Subscribers can click on here:


Latest IMTs