• Spain may request EU, IMF loans to help banks – Expansion
  • Spain’s Dep Communication Minister Castro denies report in Expansion
  • ECB buys Spanish and Italian bonds this morning
  • German auction result: Sold 4.057 bln 10 year benchmark 2% January 2022 bund issue, bid to cover 1.3, av yield 1.93%. Target had been 5 bln (EUR/USD gave ground after result announced, although BIS buying helped slow process for awhile)
  • SNB Hildebrand carried out currency deals – Weltwoche
  • SNB won’t comment on Hildebrand beyond its’ December 23 statement – Dow Jones
  • France’s Budget Minister: Govt plans to raise VAT before election
  • French November consumer spending -0.1% m/m, -2.1%, weaker than median forecasts +0.3%, -1.8% respectively
  • Eurozone December final services PMI 48.8, up a little from flash 48.3
  • UK December construction PMI 53.2, up from 52.3 in November and better than Reuters’ median forecast of 51.7
  • UK November mortgage approvals 52,854, better than Reuters’ median forecast of 52,300 and highest since December 2009
  • IMF aid request would be biggest risk to Italy – Tremonti
  • Romney wins Republican Iowa caucus

Busy morning. That felt alot more like a normal market.

EUR/USD down at 1.2983 from early 1.3035. Inbetween we’ve been up to 1.3072 and then all the way down to 1.2971.

Middle Eastern buying (given price of oil, guess they got mucho petro dollars to diversify) helped drive the pairing to session high early.

Talk had sell orders clustered 1.3075/85, including an Asian central bank with a notable interest at 1.3080/85. News of the Expansion story (see above) started to circulate and we started to drift lower. An ACB was a notable seller at this juncture and I got to think it was the same puppy who had been sitting at 1.3080/85, but can’t confirm.

The sell-off was slowed when BIS bought under 1.3030. That put a floor in until the release of the German auction results. The fact that the 5 billion target wasn’t met seemed to be the trigger for more single currency weakness, although BIS buying again under 1.3030 helped slow the downside move for a little while.

But eventually strong selling by the Big German helped initiate accelerated downside. Noted sell stops through 1.3000 were eventually tripped and we got as low as 1.2971 before steadying.

More sell stops now noted through 1.2960.

USD/JPY effectively unchanged at 76.70, session low 76.58. Kampo interest said to be down at 76.50/60.