Intraday Market Thoughts

EURs 4th Losing Week as EU Mixed on Eurobonds

by Patrik Urban
May 25, 2012 12:27

Mixed Eurobonds comments from key EU figures; German GfK consumer climate unchanged; French consumer confidence improved. UoM consumer confidence revision is next. 2nd EURUSD short hit 1.2520 target while the other did not hit 1.25 & remains in progress. All AUDUSD shorts and USDCAD longs remain progress. 1 GBPUSD short closed at 1.5650, the other remains in progress. Both gold shorts stopped out. US crude short in progress

Short covering rally at the beginning of the London session sent the greenback lower across the board except JPY. EURUSD was able to touch 1.2600 but pulled back slightly lower. European equities are mixed between -0.5% and +0.3% and the relative strength winner is NZD followed by CHF.

Conflicting comments regarding Eurobonds were heard from key European leaders. Italian PM Mario Monti said that a majority of EU leaders backed Eurobonds issuance at Brussels summit while Luxembourg PM Jean-Claude Juncker contradicted by saying that the idea did not find much support.

However, Mario Monti remains optimistic and claims that Germany can be persuaded, MNI reports. The rally was halted when ECB council member Jens Weidmann said that it would be an illusion to think that Eurobonds would resolve the ongoing crises.

From today's data we learned that the GfK German consumer climate for June stayed unchanged from May at 5.7. However, the GfK group found that consumers were more optimistic than in previous months and that their willingness to buy slightly increased.

In other news, French consumer confidence was slightly better than expected as it improved in May to 90 from previous 89; Swiss employment level rose to 4.05M from 4.04M and Italian retail sales declined 0.2% in March from previous 0.9%.

The US data calendar is limited to the final result of May University of Michigan consumer confidence that is due at 9:55 am ET and it is expected to remain unrevised at 77.8.

The short covering rally could continue today as traders square positions ahead of the long Memorial Day weekend. Despite the USD selloff, USDX continues to hold above the 81.75 support.

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