Intraday Market Thoughts

Euro Underperforms Equities Amid Mixed Italy Auction

by Patrik Urban
Dec 29, 2011 13:13

Mixed results from today's Italian bond auction; German CPI expected higher m/m; GBPUSD at fresh 13 week low and EURJPY nears 100 level. Market turns to jobless claims, Chicago PMI and pending home sales. Thursday's Premium trades are up (see link below).

Risk aversion stabilizes while EURUSD struggles to regain $1.29 after dipping to 1.2850s. US equity futures are modestly higher.

German December CPI is still being collected but states that have already published their results saw annual inflation in the 1.7% to 2.4% range. Monthly CPI rose 0.5% to 0.7% which is attributed to holiday season. Results for the whole of Germany will be published later today.

Italy sold EUR 7.02 bln (5 to 8.5 bln target) worth of bonds today. The yield was mixed, bonds maturing in 2014 and 2022 saw lower yield while bonds maturing in 2022 and 2018 saw higher yield. Bid to cover was on the weak side between 1.35 and 1.97. The 10 year Italian-German spread widened 13 bps immediately after the auction and stands at 519 bps. Italian business confidence fell in December to 92.5 from previous 94.0.

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GBPUSD fell to a fresh 13 week low and reached 1.5360. During the decline, EURGBP jumped to a 0.8395 high.

EURJPY continues to trade about 40 points above the key 100 mark. Stop loss orders have likely accumulated below and given thin liquidity, the pair could plunge should these orders be tripped.

The US session starts at 8:30 am ET with jobless claims that are expected to rise to 372K from previous 364K. Print that would be in line with expectations or better could boost sentiment as prospects for a solid NFP result on Jan 6 would improve.

At 9:45 am ET Chicago PMI is due and is seen lower at 60.4 in December from November's 62.6. Pending home sales that follow at 10:00 am ET are expected to pull back to 1.5% in November after soaring 10.4% in October.


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