Intraday Market Thoughts

Greek Breathrough Looms, Chinese Easing Rumour Help

by Patrik Urban
Mar 8, 2012 12:26

Rumor of 50 bps RRR cut from China; PSI deadline nears and the unofficial participation is 77%; Swiss CPI rose; German industrial production higher. BOE kept rates and QE steady. Market turns to ECB, jobless claims and BOC rate decision. Wednesdays Premium Intermarket Insights chart the latest technical developments in the S&P500 and the VIX, lending credence to the outlooks put forth on Monday.

The greenback trades broadly lower against all majors except JPY. European equities are gaining nearly 2% and the relative strength winner is AUD and CHF.

Market sentiment improved on rumors that China will cut RRR by 50 bps and also by unofficial Greek sources that reported that PSI participation currently stands over 77%. The deadline for PSI participation is today at 20:00 GMT and the official PSI announcement and the possible activation of the CAC will come tomorrow.

On the European data front, Swiss CPI jumped higher to 0.3% in February after January's -0.4% which is the first positive print since last October. However, the annual deflation intensified to -0.9% from -0.8%. German industrial production rose in January 1.6% m/m and 1.8% y/y.

BOE kept the official bank rate steady at 0.5% and did not increase the Asset Purchase Facility which remained at GBP 325 bln.

ECB's rate decision is due at 7:45 am and it is expected to keep rates unchanged at 1%. The main event will be press conference that starts 45 minutes later.

The NY session will start today at 8:30 am ET with ECB press conference and jobless claims that are seen marginally higher at 352K from 351K. The key point of the conference will be the description of conditions under which the ECB would consider announcing LTRO3. Since December, the ECB added over EUR 1 trillion in liquidity.

Canadian housing starts that are due at 8:15 am ET and are expected to rise in February to 199K from 198K are unlikely to cause much reaction as CAD traders will wait for BOC rate decision at 9:00 am. The overnight rate is widely expected to remain at 1% where it has been since September 2010.

A WSJ story said the Fed is considering a round of sterilized MBS purchases. First, this is yet another sign that the Fed will continue to hammer away at lingering US economic weakness. Second, this is one of the first signs that officials are somewhat concerned about inflation. For the FX markets those two factors send opposing signals but it is likely the pro-growth side will win out.

Wednesdays Premium Intermarket Insights chart the latest technical in the S&P500 and the VIX and the potential implications ahead. New trades on EURUSD, USDJPY, gold and oil, as well as existing trades in USDCAD and EURGBO. Direct access to these is found here: NonSubscribers can click here:


Latest IMTs