Hello
EUROPE: Monday sees a light calendar overall. There is no major core-European
data due, while UK data is limited to Q3 Housing Equity Withdrawal data at
0930GMT. Sovereign bond issuance in the eurozone this week is scheduled from
France and Germany and estimated to E13.0bln vs E9.12bln last week. Germany
kicks off 2013 issuance on Wednesday with re-opening of its 2-year benchmark
0.00% Dec 2014 Schatz issue for up to E5.0bln. On Thursday, France taps its
3.75% Oct 2019 OAT, 3.50% Apr 2020 OAT, 2.25% Oct 2022 OAT and 5.75% Oct 2032
OAT for between E7.0bln-E8.0bln indicative size. Overall, this supply is
outweighed by strong redemption payments from Italy E11.83bln and Germany
E24.0bln, with coupon payments from Italy E0.8bln and Germany E11.7bln -- giving
a positive cash flow of E35.3bln vs +4.2bln last week.
ECB: The crisis confronting the Eurozone is not yet over,
European Central Bank Governing Council member Jens Weidmann and ECB Executive
Board member Joerg Asmussen warned over the weekend in separate newspaper
interviews. Weidmann, who heads the German Bundesbank, told weekly Frankfurter
Allgemeine Sonntagszeitung with respect to the crisis that "the causes are far
from eliminated," and warned policymakers not to grow so weary of dealing with
the challenges as to leave them to the ECB to address. The announcement by the
ECB of the OMT program was not the silver bullet some seem to think, he said. "I
fear stability policy risks and the danger of a commingling of monetary and
fiscal policy." The central bank can only "redistribute without limit solvency
risks between the Eurozone countries," he said, but the insurance this amounts
to "does not yet make the system more stable." Moreover, Weidmann insisted, "the
Eurosystem must not come close to monetary government financing." The currently
low inflation "can change if the economy picks up again and the interest rates
would have to be hiked," he said. It is thus very dangerous if "there is another
discussion now about whether one ought to allow a little more inflation."
ECB: ECB Executive Board member Joerg Asmussen warned
policymakers in Stuttgarter Nachrichten not to let up in their efforts. "The
Eurozone is without a doubt in a stabler position than 12 months ago," he said.
"We can deal with the crisis better today. But the problems are not overcome.
The adjustment processes, the elimination of the structural and competitiveness
problems will last for years yet." Still, Asmussen said he was "cautiously
optimistic overall," even if "the enthusiasm for reform in the Eurozone mustn't
let up." Greece, he said, is "back on course" and just as Athens belied those
who predicted a euro exit in 2012, next year as well the fiscally troubled
country will manage to remain in the euro area. The ECB "has to watch out that
we do not overstretch our mandate," he conceded. Although this might sometimes
occur of necessity in a crisis, "when we approach normal times, we have to get
back out of this crisis mode," he said.
EUROPE: The FT also writes about pressure on Portugal prime minister Pedro
Passos Coelho as he works on plans to raise income taxes to an average rate of
13.2% from the current 9.8%. The report says even Portugal's own government has
described the increases as "enormous" and say it is raising pressure on the PM.
FRANCE: With unemployment rising at a rate of 30k+ per month to a rate of over
10% of the workforce, the FT notes that the rejection by France's constitutional
council of Francois Hollande's proposed 75% tax rate is a large political
problem for the President. They say on a fiscal basis, the impact on the
government's finances is manageable, although sagging poll ratings as the
President prepares his address to the nation could be more of a problem.
US: US data sees the weekly MNI Capital Goods Index at 1430GMT, followed by the
weekly MNI Retail Trade Index at 1530GMT. Also at 1530GMT, the Dallas Fed
Manufacturing Survey for December is due. Later through this week, data will
feature the usual batch of releases for the first week of the month, though
condensed into a shortened holiday period: nonfarm payrolls, the Institute for
Supply Management purchasing managers index, as well as minutes for the last
meeting of the Federal Open Market Committee. December nonfarm payrolls are
expected to show roughly the same rate of improvement as the last few months,
posting roughly 150,000 added jobs, though the unemployment rate is expected to
remain unchanged.
US PRESS: The WSJ writes how, amid stalling negotiations on the fiscal cliff,
the Pentagon is reported to be preparing to warn all of its 800,000 civilian
staff that they may be required to take mandatory leave without pay for a
certain period. The report notes that previously, the Pentagon had told staff
there would not be an immediate impact if a deal was not to be reached by
January and that other options for cost cutting would be studies before any
layoffs.
DOLLAR: Speculative accounts pared their net euro short position to nearly flat
and trimmed their still sizable net yen short position as of December 24,
according to U.S. CFTC data released Friday. The CFTC's COT report -
non-commercial, futures-only section, excluding options - showed speculators had
a net euro short of -2,549 contracts as of Monday, vs the net short of -9,736
contracts seen last week, which was already the smallest net euro short seen
since Aug 30, 2011. The last time spec accounts had a net euro long was as per
Aug 23, 2011. Spec accounts had a net yen short of -85,608 contracts as per Dec
24, vs the prior week's net yen short of -89,163 contracts and the yen short of
-94,401 contracts from Dec 11, which was the largest net yen short position
since July 2007. The record net yen short of -188,077 contracts was seen June
26, 2007. The euro closed near $1.3186 and dollar-yen at Y84.92 December 24, vs
closing levels Friday at $1.3220 and Y86.07.
EURO-DOLLAR: Closed in NY Friday at $1.3215, the rate having recovered
off earlier lows of $1.3166 following the lack of progress in Fiscal
Cliff negotiations. The pair opened on a buoyant tone in Asia and lifted
on strong cross demand to $1.3235, before profit take sales eased.
Euro-dollar extended the corrective pullback through $1.3200 in a quiet
session to print lows of 1.3188 ahead of Europe. Volumes expected light
for quarter/year end flow and with traders on the sidelines, focus
remains on whether the US can avert the looming cliff. Support seen on
the downside at $1.3166 (28 Dec low), strong demand behind at $1.3160/50
($1.3159 - Fri Dec 21 low), with stops set on a break of $1.3140. Offers
reported at $1.3240, resistance at $1.3257 (28 Dec high), ahead of
offers at $1.3280/85 (1.3284 - Thur Dec 27 high).
MNI EURO-DOLLAR: Fundamental levels (orders, options, technicals)
$1.3340 Options; Large OT set to roll off Dec31
$1.3320 Stops
$1.3295/310 Strong offers/Area recent highs
$1.3280/85 Medium offers/$1.3284 Thursday Dec27 high
$1.3257 28 Dec high
$1.3235/40 Medium offers ($1.3235 - Asian high)
$1.3212 5-day ma
$1.3188 ***Current mkt rate 0714GMT Monday
$1.3166 28 Dec low
$1.3160/50 Medium demand/$1.3159 Friday Dec21 low
$1.3140 Stops
$1.3125/15 Strong demand
$1.3100 Medium demand on approach
$1.3085/80 Medium demand
$1.3070/60 Strong demand/$1.3066 Friday Dec14 low
CABLE: Closed in NY Friday at $1.6160, the rate having bounced off
earlier lows of $1.6079 and extended recovery efforts despite continued
worries over the Fiscal Cliff. Euro-sterling closed in NY at stg0.8173,
the rate having eased off intraday highs of stg0.8200 after earlier
posting a low of stg0.8167. Cable tracked euro-dollar to $1.6179 in
early Asia, before profit take sales eased to $1.6160. The rate settled
in a tight range with volumes seen light as traders remain on the
sidelines for year-end flow watching developments from the US to see if
they can avert going over the cliff. Bids reported on the downside at
$1.6120, stronger behind at $1.6100. On the topside strong offers remain
into $1.6180, with stops set on a break, through here opens a move
towards $1.6200. Euro-sterling largely tracked euro-dollar moves and
lifted to stg0.8185 on early cross demand, the rate pared gains and
ground to stg0.8162 ahead of Europe. Strong demand reported into
stg0.8150, ahead of stg0.8133 (21-day ma).
MNI Cable: Fundamental levels (orders, options, technicals),
$1.6310 2012 high Sep21/Strong offers on approach/Stops
$1.6307 Wednesday Dec19 high
$1.6285/300 Medium offers dotted between
$1.6260 Strong offers on approach/$1.6258 76.4% $1.6307-1.6101
$1.6225/35 Medium offers
$1.6200/10 Medium offers/$1.6203 Thursday Dec27 high/Stops
$1.6170/80 Strong offers/Stops (1.6179 - Asian high)
$1.6150 **Current market rate 0735GMT Monday
$1.6134 5-day ma, European low
$1.6120 Medium demand
$1.6100 Strong demand
$1.6085/75 Strong demand/$1.6070 Stops
$1.6050 Medium demand ($1.6053 - 55-day ma)
$1.6030 100-day ma
$1.6010/00 Medium demand
MNI Euro-sterling: Fundamental levels (orders, options, technicals)
stg0.8280 Strong offers
stg0.8245/50 Medium offers
stg0.8235/Stops on break
stg0.8225 28 Dec high
stg0.8200/05 Minor offers
stg0.8187/88 Asian high, 5-day ma
stg0.8164 ***Current market rate 0740GMT Monday
stg0.8150 Strong demand
stg0.8133 21-day ma
stg0.8125/20 Medium demand
stg0.8115/10 Strong demand
stg0.8100 Strong demand
stg0.8095/90 Medium demand
stg0.8087 55-day ma
DOLLAR-YEN: Late profit take sales pared gains to close in NY Friday at
Y85.87, the rate having eased off 28 month highs of Y86.63 following
speculation that the BOJ could introduce further stimulus measures to
boost the economy. Euro-yen closed at Y113.49, the rate having eased off
spike highs of Y114.02 after earlier posting a low of Y113.30. Thin
markets continued overnight in Asia with the Tokyo holiday and the
dollar extended Friday's losses to Y85.67 in early trade, flushing stops
on the move. Reported demand cushioned moves and the rate bounced back
above Y86.00 on broad dollar strength, extending to Y86.18. Late profit
take sales eased as the pair consolidated gains ahead of Europe. Offers
reported at Y86.30/35, a break opens Y86.64 (28 Dec high). Euro-yen
opened on the defensive to Y113.20, before tracking euro-dollar's
extended recovery to Y113.80. Tight range trade continued throughout the
session closing ahead of Europe at Y113.55. Tech support seen on the
downside at Y113.27/20 (5-day ma, Asian low), a break opens a move
towards strong bids into Y113.00.
MNI DOLLAR-YEN: Fundamental levels (orders, options, technicals)
Y87.72 26 Jul 10 high
Y87.57 20 Jul 10 high
Y87.50 Offers on approach, barrier, stops
Y87.20/25 Medium offers
Y86.85/7.00 Strong offers/Barrier at Y87.00
Y86.64 28 Dec high
Y86.30/35 Medium offers
Y86.13 ***Current market price 0726GMT Monday
Y85.72/67 5-day ma, Asian low
Y85.60/50 Medium demand
Y85.30 Medium demand on approach
Y85.10/00 Medium demand
Y84.85/80 Strong demand/Stops
Y84.50 Strong demand
Y84.31 24 Dec low
MNI EURO-YEN: Fundamental levels (orders, options, technicals)
Y115.00 Strong offers on approach/Option barrier
Y114.99 Tech 200-week moving average
Y114.80/85 Medium offers
Y114.70 27 Dec high
Y114.60 European high Friday before drop to Y113.30
Y114.15/20 Medium offers
Y114.00 Strong offers
Y113.83 Asian high
Y113.53 ***Current market price 0730GMT Monday
Y113.27/20 5-day ma, Asian low
Y113.10/00 Medium demand
Y112.70 Medium demand
Y112.50 Strong demand
Y112.00 Medium demand on approach
Y111.60/50 Strong demand/Stops
MNI AUSSIE-DOLLAR: Fundamental levels (orders, options, technicals)
$1.0510 Medium offers/Stops
$1.0500 Strong offers on approach
$1.0480 Medium offers
$1.0460 21-day ma
$1.0450/55 Medium offers/Stops
$1.0420/30 Medium offers
$1.0409/12 Asian high, 55-day ma
$1.0388 ***Current market price 0744GMT Monday
$1.0361 28 Dec low
$1.0355/45 Area of pullback lows Thursday Dec27/Real money $1.0350
$1.0335/30 Strong demand/Stops
$1.0310/00 Medium demand/Stops
$1.0294/88 200-day ma, Nov16 low
$1.0250 Strong demand
$1.0240/30 Medium demand ($1.0236 - 23 Oct low)
EUROZONE ISSUANCE: Sovereign bond issuance in the eurozone this week is
scheduled from France and Germany and estimated around E13.0bln vs E9.12bln last
week. Germany kicks off issuance in 2013 on Wednesday with re-opening of its
2-year benchmark 0.00% Dec 2014 Schatz issue for up to E5.0bln. On Thursday,
France taps its 3.75% Oct 2019 OAT, 3.50% Apr 2020 OAT, 2.25% Oct 2022 OAT and
5.75% Oct 2032 OAT for between E7.0bln-E8.0bln indicative size. However, this
supply is outweighed by strong redemption payments from Italy E11.83bln and
Germany E24.0bln, with coupon payments from Italy E0.8bln and Germany E11.7bln
-- giving a positive cash flow of E35.3bln vs +4.2bln last week. Looking ahead
into the following week, supply is due from Austria (syndication deal likely),
Netherlands (new 3-year DSL), Germany (new Feb 2018 Bobl) and Italy (BTP
auctions) -- but once again outweighed by redemption payment from France
E24.67bln and coupon from Greece E0.1bln -- giving a positive net cash flow of
E6.7bln. For full details of forthcoming issues, please see Eurozone bond
auction calendar & MNI Eurozone Net Cash Flow Matrix.
EUROZONE T-BILL ISSUANCE: France will be the only European country to come to
the Eurozone Sovereign T-bill market this week, kicking off issuance for 2013.
On Wednesday France plan to issue between E3.4bln and E3.8bln new 3-month Mar
28, 2013 BTF, issue between E1.3bln and E1.7bln new 6-month Jun 13, 2013 BTF and
re-open between E1.1bln and E1.5bln of a 12-month Dec 12, 2013 BTF. In terms of
T-bill redemptions for this week, we only have France with E7.924bln, leaving
net cash flow positive to the tune of E924mln. Looking ahead to week commencing
Jan 7th, supply is scheduled from Germany (new 6-month bubill), Netherlands
(re-open 3-month and new 12-month DTCs), France (3-/6-/12-month BTFs), Greece
(new 26-week T-bill), Belgium (re-open 3-/6-month T-bill) and Italy (new
12-month BOT).
EUROZONE: Timeline of key events in the eurozone for next few weeks:
- Dec 31 Italy T-till redemption for E10.35bln
- Dec 31 Italy CTZ bond redemption for E11.518bln
- Jan 01 Ireland takes over 6-month Presidency of the Council of EU
- Jan 02 European Dec manufacturing PMI survey (final)
- Jan 03 Spain Dec unemployment data
- Jan 04 Chancellor Merkel at CDU New Year's reception in Wilhelmshaven
- Jan 04 Eurozone Dec flash HICP
- Jan 04 European Dec services PMI survey (final)
- Jan 05 German Merkel Lower Saxony state election rally Braunschweig
- Jan 09 Eurozone Q3 GDP (3rd estimate)
- Jan 10 ECB Governing Council meeting, Draghi press conference
- Jan 14 Italy T-bill redemption for E11.5bln
- Jan 16 ECB start of reserve maintenance period
- Jan 18 Spain T-bill redemption for E5.395bln
- Jan 18 Portugal T-bill redemption for E1.266bln
HAPPY NEW YEAR...
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