Euro May Bounce as Finance Ministers Activate Spain Bank Bailout

2012-07-09 05:30:00 Ilya Spivak, Head Strategist, APAC

Talking Points

Eurozone FinMin Summit in Focus, Spain Bank Bailout to be Executed
Chinese Inflation Hits 29-Month Low, Boosting Case for PBOC Cuts
Japanese Current Account Surplus Shrinks, Machine Orders Plummet

All eyes are on the Eurozone finance ministers’ summit today. The sit-down is expected see officials begin implementation of June’s EU leaders’ summit framework. While little is likely to be achieved on longer-term issues like joint bank governance and expanded powers forthe EFSF/ESM bailout funds, the Spanish bank rescue is likely to figure prominently into the proceedings. Operational details of the effort are expected to be ratified at the sit-down and may produce a near-term bounce in the Euro as well as sentiment-linked currencies. France is also due to sell €7.8 billion in 91-, 168- and 350-day bills, with traders keeping an eye on average yield and bid-to-cover readings as a gauge of sovereign stress in the region.

Most major currencies consolidated in overnight trade, with the risk-geared Australian and New Zealand Dollars narrowly underperforming as Asian bourses fell in response to Friday’s disappointing US jobs report. China’s Consumer Price Index figures showed inflation slowed more than expected, printing at a 29-month low of 2.2 percent. The outcome hints policymakers in the world’s second-largest economy may have scope to ease monetary policy further after cutting rates last week. Japanese Machine Orders slumped 14.8 percent in May, marking the largest monthly in over a decade, while the Current Account surplus shrank to the smallest in six months.

Asia Session: What Happened

GMT	CCY	EVENT	ACT	EXP	PREV
23:01	GBP	Lloyds Employment Confidence (JUN)	-51	-	-59
23:50	JPY	Machine Orders (MoM) (MAY)	-14.8%	-2.6%	5.7%
23:50	JPY	Machine Orders (YoY) (MAY)	1.0%	7.0%	6.6%
23:50	JPY	Current Account Total (¥) (MAY)	215.1B	493.1B	333.8B
23:50	JPY	Adjusted Current Account Total (¥) (MAY)	282.2B	401.4B	288.6B
23:50	JPY	Trade Balance - BOP Basis (¥) (MAY)	-848.2B	-836.8B	-463.9B
23:50	JPY	Current Account Balance (YoY) (MAY)	-62.6%	-13.6%	-21.2%
23:50	JPY	Bank Lending Banks ex-Trust (JUN)	0.8%	-	0.4%
23:50	JPY	Bank Lending incl Trusts (YoY) (JUN)	0.7%	-	0.2% (R-)
1:30	CNY	Consumer Price Index (YoY) (JUN)	2.2%	2.3%	3.0%
1:30	CNY	Producer Price Index (YoY) (JUN)	-2.1%	-2.0%	-1.4%
1:30	AUD	ANZ Job Advertisements (MoM) (JUN)	-1.2%	-	-2.6% (R-)
4:30	JPY	Bankruptcies (YoY) (JUN)	-16.3%	-	7.2%
5:00	JPY	Eco Watchers Survey: Current (JUN)	43.8	47.5	47.2
5:00	JPY	Eco Watchers Survey: Outlook (JUN)	45.7	-	48.1

Euro Session: What to Expect

GMT	CCY	EVENT	EXP	PREV	IMPACT
5:45	CHF	Unemployment Rate (JUN)	2.9%	3.0%	Medium
5:45	CHF	Unemployment Rate s.a. (JUN)	3.2%	3.2%	Medium
6:00	EUR	German Current Account (€) (MAY)	10.2B	11.2B	Low
6:00	EUR	German Trade Balance (€) (MAY)	14.1B	14.4B	Medium
6:00	EUR	German Exports s.a. (MoM) (MAY)	0.2%	-1.7%	Low
6:00	EUR	German Imports s.a. (MoM) (MAY)	0.8%	-4.9%	Low
6:30	EUR	French Bank of France Bus. Sentiment (JUN)	92	93	Low
8:30	EUR	Euro-Zone Sentix Investor Confidence (JUL)	-26.6	-28.9	Low
13:00	EUR	France to Sell €7.8B in 91-, 168- and 350-day Bills	-	-	Medium
15:00	EUR	Euro-Zone Finance Ministers Meet in Brussels	-	-	High