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Market Vibrations: News and Commentary from the Europe Desk (1145 GMT)

Market Vibrations: News and Commentary from the Europe Desk (1145 GMT)

Research, Research Team

1145 GMT: Germany's proposal of an EU budget commisioner with powers to veto tax and spending decision is apparently finding supoprt at the IMF, and could serve as a blueprint for other nations that have had to or will need to seek international aid in the future. The proposal demonstrates that certain influential bodies have lost faith in Greece's ability to implement the kind of major strucural changes that are being demanded by outside entities. Greek PM Papademos firmly rejected the proposal and some have speculated that the proposal was a ploy by the German CDU party to oust Greece from the EMU in the absense of a formal mechanism to do so. Also the German fininace ministry has reiterated its support of an EU-wide financial transaction tax in the framework of the EU fiscal pact current facuing deliberation. Meanwhile, we are hearing chatter of hedge funds going bullish on major commodities in the coming weeks, despite the IMF cutting global growth forcasts last week.

1030 GMT: Details are emerging regarding the fiscal pact submitted to EU leaders in Brussels today. According to the proposition, the pact will take effect once ratified by 12 EU counutries. Moreover, only nation that accept the deal will be able to access the ESM. Countries must ratify the pact by March 2012. Meanwhile, Italian bond yields are starting narrow down after reaching critical spread levels in December.

0930 GMT: Irish European Affairs Minister Creighton expressed satisfaction with the EU fiscal union proposal, adding that she hopes that it will be ratified as is. She added that should Ireland reject the proposal in an upcoming referendum, it would be very hard for the nation to stay with the Euro. A recent poll in Ireland showed a slight pluralisty support the treaty. Meanwhile, Italian business confidence came out weaker than expected at 92.1 versus 92.3 expected.

0815 GMT: France's FinMin Baroin coming on the air with some aggresive comments on the current crisis, saying the crisis is of a "violent" and "unprecedented" kind, and that the kind of growth needed for stabilization requires a "positive shock" to the economy. Baroin tempered his statements by pointing out that although a slowdown was seen over the last four months, the previous months saw some stabilization. Meanwhile on the data front, Saxony inflation for January came in at 2.3% YoY versus the previous 2.2%, while Spanish 4Q GDP was -0.3% as expected.

0720 GMT:Greece remains paramount at the EU summit today. A new report paper released overnight said that the risk of recession in the Eurozone is “certain,” while stating that the short term dependency of the economy on ECB three-year notes and other nonstandard ECB is not healthy. Meanwhile, the Greek Prime Minister said overnight that Greece faces “the specter of bankruptcy and everything it entails” is a dire warning before the EU summit. In other news, Fitch put four Aussie banks on a watch list for negative downgrade, in a move that we believe may negatively affect the high yielding currency which is already at risk for downside given the situation in the correlated Chinese economy.

Market Vibrations is a new DailyFX feature which follows the European trading session with real-time updates and breaking news and analysis. It is updated regularly, so check back for the latest FX developments.

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.