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FOREX: Euro Crisis Still in Focus, Merkel and Bond Auctions on Tap

FOREX: Euro Crisis Still in Focus, Merkel and Bond Auctions on Tap

2011-12-14 08:28:00
Ilya Spivak, Sr. Currency Strategist
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Talking Points

  • Euro Debt Crisis Still in Focus, Spotlight on Merkel and Bond Auctions
  • UK Jobless Claims to Rise, Reaffirming Dovish Bank of England Outlook
  • Australian Consumer Confidence Fell to Lowest in 4 Months, Says Westpac
  • China’s Money Supply Growth Rate Slowed to Weakest in Over a Decade

The major currencies consolidated in choppy ranges against the US Dollar overnight as markets digested the previous day’s sharp volatility. On the economic data front, the Westpac gauge of Australian Consumer Confidence dropped 8.3 percent to the lowest in four months while Chinese Money Supply growth slowed to an annual clip of 12.7 percent, the weakest in over a decade. The former release is – at least to some extent – a reflection of the trends reflected in the latter. Slowing growth in China telegraphed in increasingly sluggish monetary expansion bodes ill for export demand for Australian iron ore and coal, implying headwinds for employment and consumption in the months ahead.

Looking ahead, the focus turns to a pair of bond auctions from Italy and Germany. The former country is set to sell up to €3 billion in 2016 bonds while the latter sells up to €5 billion in 2-year notes. Traders’ singular focus on the Eurozone debt crisis over recent days means the auctions’ outcomes – gauged with average yield levels and bid-to-cover ratios – are likely to be closely scrutinized as a gauge of lingering sovereign stress in the currency bloc. The markets will also pay close attention to a speech by Angela Merkel to the German Parliament on the EU Summit Accord reached last week after the Chancellor’s remarks on the matter to her own CDU party rattled investors yesterday.

Elsewhere, UK Jobless Claims are expected to rise 13,700 in November after a paltry 5,300 in the previous month, underscoring souring economic growth conditions and reaffirming the now-familiar dovish Bank of England outlook. Sizing up sentiment trends, S&P 500 stock index futures are correcting cautiously higher but that is almost certainly not enough to contend that a recovery in risk appetite is necessarily ahead. Indeed, the increase is well within the bounds of a shallow corrective bounce, a reasonable outcome after an average drop of over 0.8 percent across global stock exchanges in the preceding 24 hours. This means a clear “risk on” vs. “risk off” bias is yet to be decided.

Asia Session: What Happened

GMT

CCY

EVENT

ACT

EXP

PREV

23:30

AUD

Westpac Consumer Confidence (DEC)

-8.3%

-

6.4% (R+)

23:30

AUD

Westpac Consumer Confidence Index (DEC)

94.7

-

103.4

0:00

AUD

DEWR Internet Skilled Vacancies (MoM) (NOV)

-1.0%

-

-1.9%

2:00

CNY

Conference Board China Leading Index (OCT)

160.1

-

160.2

2:00

NZD

Non Resident Bond Holdings (NOV)

60.2%

-

61.4%

4:30

JPY

Industrial Production (MoM) (OCT F)

2.2%

-

2.4%

4:30

JPY

Industrial Production (YoY) (OCT F)

0.1%

-

0.4%

4:30

JPY

Capacity Utilization (MoM) (OCT F)

4.1%

-

-3.6%

7:05

CNY

New Yuan Loans (NOV)

562.2B

550.0B

586.8B

7:05

CNY

Money Supply – M0 (YoY) (NOV)

12.0%

-

11.9%

7:05

CNY

Money Supply – M1 (YoY) (NOV)

7.8%

8.6%

8.4%

7:05

CNY

Money Supply – M2 (YoY) (NOV)

12.7%

12.8%

12.9%

Euro Session: What to Expect

GMT

CCY

EVENT

EXP

PREV

IMPACT

8:15

CHF

Producer & Import Prices (MoM) (NOV)

-0.3%

-0.2%

Low

8:15

CHF

Producer & Import Prices (YoY) (NOV)

-1.9%

-1.8%

Low

9:30

GBP

Claimant Count Rate (NOV)

5.1%

5.0%

Medium

9:30

GBP

Jobless Claims Change (NOV)

13.7K

5.3K

Medium

9:30

GBP

Average Weekly Earnings 3M/YoY (OCT)

2.0%

2.3%

Low

9:30

GBP

Weekly Earnings ex Bonus 3M/YoY (OCT)

1.7%

1.7%

Low

9:30

GBP

ILO Unemployment Rate (3M) (OCT)

8.3%

8.3%

Medium

10:00

EUR

Euro-Zone Indus Production w.d.a. (YoY) (OCT)

2.1%

2.2%

Low

10:00

EUR

Euro-Zone Indus Production s.a. (MoM) (OCT)

0.0%

-2.0%

Low

10:00

CHF

ZEW Survey (Expectations) (DEC)

-

-64.3

Medium

10:00

EUR

Italy to Sell €3bn in 2016 Bonds

-

-

High

10:15

EUR

Germany to Sell €5bn in 2-Year Notes

-

-

High

11:00

EUR

Merkel Speaks in German Parliament on EU Accord

-

-

High

Critical Levels

CCY

SUPPORT

RESISTANCE

EURUSD

1.2872

1.3180

GBPUSD

1.5411

1.5589

--- Written by Ilya Spivak, Currency Strategist for Dailyfx.com

To contact Ilya, e-mail ispivak@dailyfx.com. Follow me on Twitter at @IlyaSpivak

To be added to Ilya's e-mail distribution list, send a note with subject line "Distribution List" to ispivak@dailyfx.com

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