Intraday Market Thoughts

Risk Appetite Improves Ahead Of FOMC

by Patrik Urban
Dec 12, 2012 13:25

Greek buyback above EUR 30 bln; UK jobless claims fell; EZ industrial production declined; Swiss ZEW improved; solid Italian auction. Key event is FOMC rate decision, the release of economic forecasts and the press conference. Both of Fridays EURUSD longs and the 2nd CADJPY hit all targets long trades hit all targets for 90 and 110 pips respectively and CADJPY for 120 pips.

Greece announced that it bought back EUR 31.9 bln of bonds. According to MNI, the weighted average purchase price paid across all series is 33.8%. The principle amount of EFSF notes to be delivered is EUR 11.29 bln.

UK jobless claims fell unexpectedly 3K in November after rising 6K in October. The claimant count rate remained steady at 4.8% and the ILO unemployment was unchanged in October at 7.8%. GBPUSD pushed to 1.6145.

In other news, Eurozone industrial production fell 1.4% in October from prior -2.5%, Swiss ZEW economic expectation improved in December to -15.5 from previous -27.9 and sources from Germany claim that today's Ecofin meeting could see a breakthrough in the banking supervision discussions. EURUSD trades firmly above 1.30.

Italy reached a full take up as it sold 12 month BOTs totaling EUR 6.5 bln. The average yield declined to 1.456% from 1.762% and cover rose to 1.94 from 1.76.

Markets are awaiting today's conclusion of the FOMC meeting. The statement along with the fed funds rate decision is due at 12:30 pm ET, the release of the economic projections is scheduled for 2:00 pm and the press conference starts at 2:15 pm.

As the Operation Twist comes to its end, the market anticipates a new round of bond buying around USD 40-45 bln a month. The FED already buys USD 40 bln per month in mortgage backed securities so the monthly purchases would reach astonishing USD 80-85 bln. The FED's balance sheet is already around USD 2.8 trillion. The interesting question is how the market would respond if the chairman Bernanke announced a new easing but the amount would be smaller than the market expects.

200 pips in both of Fridays EURUSD longs (Pre NFP) and 120 pips in the 2nd CADJPY trade, accumulating for 240 pips for the last 2 CAJPY trades.

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Act Exp Prev GMT
ILO Unemployment Rate (OCT) ((3m))
7.8% 7.8% 7.8% Dec 12 9:30
Claimant Count Rate (NOV)
4.8% 4.8% Dec 12 9:30
Claimant Count Change (NOV)
-3K 7K 6K Dec 12 9:30
ZEW Survey - Expectations (DEC)
-15.5 -27.9 Dec 12 10:00
Industrial Production s.a. (OCT) (m/m)
-1.4% 0.2% -2.5% Dec 12 10:00
Industrial Production w.d.a. (OCT) (y/y)
-3.6% -2.3% -2.3% Dec 12 10:00
Fed Interest Rate Decision (DEC 12)
0.25% 0.25% 0.25% Dec 12 17:30
SNB Interest Rate Decision (DEC 13)
0% 0% Dec 13 8:30

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