Fundamentals could not get the ball rolling, that was left to rumors of a Ã¢â‚¬ËœlargerÃ¢â‚¬â„¢ German bank requiring capital. Dollars and Yen continue to grind stronger allowing the EUR to print a 15-month low on funding stress issues in Euro-land. What Euro financial institution does not require capital? Not helping investors mood were comments from the Greek Prime Minister Papademos. He stated that slashing incomes are the only way for his country to remain in the EU and receive more financing from international creditors to avert an economic collapse. As they say, itÃ¢â‚¬â„¢s difficult to get Ã¢â‚¬Ëœblood from a stoneÃ¢â‚¬â„¢.
Over the next two weeks FX traders will hopefully have become experts in the FI income sector. It is there that the front line action will occur. There are a few important issues coming to the market that will be testing investors appetite for risk. The demand for varying issues will be highlight the Ã¢â‚¬Å“faithÃ¢â‚¬Â being put into the various economies. YesterdayÃ¢â‚¬â„¢s German Bund auction, a solid product in market theory, received a somewhat lackluster response to the issue. This certainly is not an encouraging response for Italian and Spanish debt auctions next week. Both of these economies are in the investors Ã¢â‚¬ËœcrosshairsÃ¢â‚¬â„¢. We can expect the back-room staff, the ECB and company, to create a positive atmosphere around troubling issues. This morning they were in buying Spanish product. Remember, all of this trading in various markets and market prices is about perception. Dealers are required to create it and traders deal on it! Expect the ECB to be buying government bonds as part of its SMP, where it intervenes in the secondary bond market to ensure depth and liquidity.
This morning France was on the agenda. With Sarkozy publicly concerned about his country retaining its AAA rating status, the issue of +8b euros of debt today was the countryÃ¢â‚¬â„¢s first test this year of investor appetite for its bonds. The result, France sold +4.02b euros of benchmark 10-year bonds at an average yield of +3.29% from +3.18%. The 10-year sector, usually the benchmark indicator, debt bid-to-cover ratio fell to 1.64 from 3.05. Despite being somewhat well received for other remaining maturities, Frances cost of borrowing has increased, providing another reason to want to own less of the EUR. Last tally, with Italy and Spain amongst countries in the coming weeks to sell debt that may reach EUR+262bÃ¢â‚¬â„¢s worth in the first quarter, rising funding costs will not make saving the 13-year old currency any easier.
The market will now focus on North American employment data, with NFP out tomorrow. This morningÃ¢â‚¬â„¢s ADP report will provide a preview of tomorrows print (the correlation between the two prints has been tentative at best of late). It seems that market consensus is looking at an +178k ADP result, which approximates a +170k private payrolls print. The non-manufacturing ISM is also released and is expected to rise off November’s two-year low of 52, with seasonal effects in the employment component contributing. Jobless claims will also be a focus, though the holiday period complicates interpretation of this data into year-end. Will the stronger data provide support for US growth proxy currencies like the CAD and AUD? In theory they should, however, strong risk conviction has been fleeting at best and a surer bet would have participants wait until tomorrows job release for direction.
Other Dollars trade in a Vacuum
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