Another Greek Deal Rumor Sends USD Lower

German and Portuguese solid auctions; Swiss retail sales and PMI declined; intervention threat EURCHF and USDJPY; UK manufacturing PMI surprised to the upside; Eurozone CPI eased. Focus turns to ADP and ISM manufacturing. Tuesday's trades are partly in progress.

Rumors that the Greek swap deal could be announced today reversed USD strength that started yesterday and the buck has returned to its recent lows. Major European equities gained about 1.5% and the relative strength winners are NZD and AUD, followed by CHF.

Germany sold EUR 4.09 bln worth of 10 year bund today (target EUR 5 bln). The average yield declined to 1.82% from 1.93% and bid to cover also improved to 1.4 from 1.3. Portuguese 3 month and 6 month bill auction also went well as it reached a full take up at EUR 1.5 bln with lower average yields. However, bid to cover declined slightly.

Swiss retail sales grew only 0.6% December from previous 1.8% y/y and January SVME PMI fell to 47.3 from 49.1. CHF is nevertheless among the best performers and EURCHF continues to trade right above the 1.20 floor. The threat of an intervention is also high on the USDJPY pair that fell to levels not seen since the unilateral October intervention. USDJPY trades at the 76 figure and dealers report plentiful sellers on rallies.

In the UK, manufacturing PMI grew solid 52.1 in January from 49.7 in December. After three months of contractions, the manufacturing sector expanded again and printed the best result since June 2011. Also noteworthy is the fact that over the past three months each print was revised higher.

In other news, Eurozone CPI eased to 2.7% from 2.8% y/y and manufacturing PMI was revised higher to 48.8 from initial estimate 48.7. The ECB deposits continue to be elevated as they reached EUR 472.45 bln on Tuesday.

The New York session will start at 8:15 am ET with January ADP report that is expected to decline to 189K from December's strong 325K.

ISM manufacturing is due at 10:00 am and is seen higher at 54.6 from previous 53.9

Tuesday's trades are partly in progress. Key charts on EURUSD Volatility and EURUSD Daily. Trades in EURUSD, AUDUSD, CADJPY and US crude oil http://ashraflaidi.com/products/sub01/access/?a=592