Forex News | Currency News by Forexlive

US DATA: Amer Staffing Assoc index 86 in Jan 22 wk vs 86 prior.

So much for month-end dollar sales…The greenback is suddenly bid to old boots except against the JPY.

Stops clustered in the 1.3060 area, traders report.

• One step from closing debt deal
• EU partners, IMF want commitments and guarantees

–Have Borrowed E203 Billion From ECB, Can Borrow E150 Billion More

ROME (MNI) – Italy’s banks are not out of the woods yet, despite
markedly more comfortable liquidity positions — thanks to the European
Central Bank — and improving market sentiment towards Italian sovereign
bonds, the Bank of Italy’s Director General Fabrizio Saccomanni said
Tuesday.

Saccomanni, in testimony to the Finance Committee of the Italian
Senate, noted that the recent three-year refinancing operation by the
ECB had produced a “significant improvement in the short-term liquidity
position” of the country’s banking sector.

Italian banks were the biggest bidders in the ECB’s three-year LTRO
on December 21, taking about E50 billion out of the E489 total loaned
out by the ECB, according to a recent study by Morgan Stanley.
Saccomanni said his country’s banks now have E203 billion in outstanding
loans from the ECB and could still borrow up to E150 billion more.

He noted that sentiment towards Italy has shifted in financial
markets. “One can see the first signs that investors are appreciating
the measures undertaken by our country in the reduced yield spreads with
German public debt,” he said. “That will bring benefits to the banks’
cost of funding, supporting their ability to finance the economy.”

Saccomanni also noted that Italian banks have made “significant
progress” in meeting new capital targets and containing costs. “The
banks’ process of capital reenforcement has been in progress for some
time and was particularly intense in 2011, spurred by the Bank of
Italy,” he said.

Despite this, however, Italian banks continue to feel the pressure
of financial market tensions and of weakness in the economy, “with
negative repercussions for their profitability,” he said. “It is
essential to reduce the markets’ perception of Italian risk and to
interrupt the perverse interaction between the sovereign spread and that
of banks.”

Saccomanni said that the possibility of public funds to help banks
recapitalize “cannot be excluded.” But if they are used, “they must be
limited and temporary; they must not aggravate the public debt and they
must [be provided] in a way that avoids interference with management of
the institution.”

Saccomanni cited the success of a recent effort by Unicredit,
Italy’s biggest bank, to raise capital, noting that after an initial
negative market reaction the E7.5 billion stock offer was fully
subscribed. He said the central bank is evaluating the capital-raising
plans of other Italian banks.

–Paris newsroom, +331-42-71-55-40; bwolfson@marketnews.com

[TOPICS: M$I$$$,M$X$$$,M$$EC$,MGX$$$,M$$CR$]

US DATA: Jan Dallas Fed data show services revenue 13.7 vs 9.8, services
employment 12.4 vs 8.8. Retail activity 17.9 Jan vs 17.8, retail sales
index 12.1 vs 13.7.

WASHINGTON (MNI) – The following are excerpta from the U.S.
Congressional Budget Office “Budget and Economic Outlook, published
Tuesday:

Ooutcomes that are considerably worse than CBO’s forecast are also
possible. A significant worsening of the banking and fiscal problems in
Europe, for example, could lead to further turmoil in international
financial markets that could spill over to U.S. financial
marketsreducing wealth, severely constraining the availability of
credit, reducing hiring, and causing higher unemployment. Those
conditions could trigger a self reinforcing downward spiral, weakening
the growth of households’ income and diminishing consumers’ and
businesses’ confidence and, in turn, lessening spending by households
and businesses and therefore the need for workers.

Other events could also lead to outcomes worse than CBO projects. A
surge in oil prices or drop in households wealth could decrease the
demand for goods and services. Those conditions could discourage
businesses from investing and hiring, possibly triggering another
downward spiral of lower spending, confidence, and employment.

–

U.S. Budget Policy In Place That Improves Fiscal Outlook But are Subject
to Possible Change:

1) Provisions of the Tax Relief, Unemployment Insurance
Reauthorization, and Job Creation Act of 2010 (Public Law 111-312,
referred to in this report as the 2010 tax act) that limited the reach
of the alternative minimum tax (AMT) expired on December 31, 2011. Other
provisions that extended the lower tax rates and expanded credits and
deductions originally enacted in the Economic Growth and Tax Relief
Reconciliation Act of 2001, the Jobs and Growth Tax Relief
Reconciliation Act of 2003, and the American Recovery and Reinvestment
Act of 2009 (ARRA, P.L. 111-5) are set to expire on December 31, 2012.

2) The Temporary Payroll Tax Cut Continuation Act of 2011 (P.L.
112-78) continued for two months the reduced payroll tax originally
provided in the 2010 tax act, the availability of emergency unemployment
compensation enacted previously, and Medicare’s existing payment rates
for physicians’ services (rather than allowing those rates to drop by
27 percent as was scheduled to occur). All of those provisions are
currently scheduled to expire on February 29, 2012 (although legislation
to extend them again is being considered).

3) Provisions of the Budget Control Act of 2011 (P.L. 112-25) that
established automatic enforcement procedures designed to restrain both
discretionary and mandatory spending are set to take effect in January
2013. If fully implemented, those procedures will reduce discretionary
outlays by $845 billion (relative to projections with no automatic cuts)
over the 2013V 2022 period, CBO estimates. Mandatory outlays will be
$140 billion lower over the projection period as a result of the
automatic procedures, largely because of reductions in Medicare
spending.

** Market News International Washington Bureau: 202-371-2121 **

[TOPICS: M$U$$$,MFU$$$,MCU$$$]

US DATA: Jan Dallas Fed Services activity 18.3 vs 8.6r.

That’s two weeks from today…

• Greece must make difficult decisions in next few days
• Political parties must put country first

WASHINGTON (MNI) – The following are excerpts from the
Congressional Budget Office updated economic and fiscal update summary,
published Tuesday:

Each January, CBO prepares baseline budget projections spanning
the next 10 years. Those projections are not a forecast of future
events; rather, they are intended to provide a benchmark against which
potential policy changes can be measured. Therefore, as specified in
law, those projections generally incorporate the assumption that current
laws are implemented.

But substantial changes to tax and spending policies are slated to
take effect within the next year under current law. So CBO has also
prepared projections under an “alternative fiscal scenario,” in which
some current or recent policies are assumed to continue in effect, even
though, by law, they are scheduled to change. The decisions made by
lawmakers as they confront those policy choices will have a significant
impact on budget outcomes in the coming years. CBO’s Current-Law
Baseline

CBO projects a $1.1 trillion federal budget deficit for fiscal year
2012 if current laws remain unchanged. Measured as a share of the
nations output (gross domestic product, or GDP), that shortfall of 7.0
percent is nearly 2 percentage points below the deficit recorded in
2011, but still higher than any deficit between 1947 and 2008. Over the
next few years, projected deficits in CBOs baseline decline markedly,
dropping to under $200 billion and averaging 1.5 percent of GDP over the
20132022 period.

Revenues

Much of the projected decline in the deficit occurs because, under
current law, revenues are projected to shoot up by almost $800 billion,
or more than 30 percent, between 2012 and 2014from 16.3 percent of GDP
in 2012 to 20.0 percent in 2014. That increase is mostly the result of
of the recent or scheduled expirations of tax provisions, such as those
initially enacted in 2001, 2003, and 2009 that lower income tax rates
and those that limit the number of people subject to the alternative
minimum tax (AMT).

Under current law, CBO projects that revenues will continue to rise
relative to GDP after 2014 largely because increases in taxpayers
inflation-adjusted income will push more income into higher tax brackets
and subject more of it to the AMT.

Spending

Outlays in CBO’s baseline projections decline modestly relative to
GDP over the next several years before turning up again later in the
decade. The modest declines are the result of an expanding economy and
statutory caps on discretionary appropriations. The aging of the
population and rising costs for health care drive increases in spending
in later years.

Projected spending in CBO’s baseline averages 21.9 percent of GDP
over the 20132022 period. That figure is less than the 23.2 percent CBO
estimates for 2012, but it remains elevated by historical standards. As
a share of GDP, discretionary spending is projected to decline to its
lowest level in the past 50 years by 2022, but that decline will be
partially offset by increases in spending for mandatory programs, which
are projected to climb from 13.3 percent of GDP in 2013 to 14.3 percent
in 2022. Driven by higher interest rates and additional accumulation of
debt, net interest costs will grow significantlyfrom 1.4 percent of GDP
this year to 2.5 percent in 2022. CBOs Alternative Fiscal Scenario

CBO’s baseline projections are heavily influenced by changes in tax
and spending policies that are embodied in current lawchanges that in
some cases represent a significant departure from recent policies.

Baseline

Budgetary Effects of Selected Policy Alternatives
(Billions of dollars)

CBO’s alternative fiscal scenario shows the budgetary consequences
of maintaining certain tax and spending policies that have recently been
in effect. That scenario incorporates the following assumptions:

–Expiring tax provisions (other than the payroll tax reduction)
are extended [under current law, those expirations will boost individual
income taxes in a variety of ways by amounts totaling $3.8 trillion from
2013 through 2022];

–The AMT is indexed for inflation after 2011 [under current law,
its parameters are fixed, and the number of taxpayers affected by the
AMT will jump from 4 million in calendar year 2011 to 30 million in
2012];

–Medicare’s payment rates for physicians’ services are held
constant at their current level [under current law, those rates are
scheduled to drop by 27 percent this March and more in later years]; and

–The automatic spending reductions required by the Budget Control
Act do not take effect [under current law, they will impose reductions
totaling about $109 billion a year starting in January 2013].

Under that alternative fiscal scenario, far larger deficits and
much greater debt would result than are shown in CBOs baseline.
Deficits would average 5.4 percent of GDP over the 20132022 period,
rather than the 1.5 percent reflected in CBOs baseline projections.
Debt held by the public would climb to 94 percent of GDP in 2022, the
highest figure since just after World War II.

The Economic Outlook

In part because of the dampening effect of the higher tax rates and
curbs on spending scheduled to occur this year and next, CBO expects
that the economy will continue to recover slowly, with real GDP growing
by 2.0 percent this year and 1.1 percent next year (as measured by the
change from the fourth quarter of the previous calendar year). CBO
expects economic activity to quicken after 2013 but to remain below the
economys potential until 2018.

In CBO’s forecast, the unemployment rate remains above 8 percent
both this year and next, a consequence of continued weakness in demand
for goods and services. As economic growth picks up after 2013, the
unemployment rate will gradually decline to around 7 percent by the end
of 2015, before dropping to near 5 percent by the end of 2017.

While the economy continues to recover during the next few years,
inflation and interest rates will remain low. In CBOs forecast, the
price index for personal consumption expenditures increases by just 1.2
percent in 2012 and 1.3 percent in 2013, and rates on 10-year Treasury
notes average 2.3 percent in 2012 and 2.5 percent in 2013. As the
economys output approaches its potential later in the decade, inflation
and interest rates will rise to more normal levels.

Many developments could produce economic outcomes that differ from
CBO’s forecast. For example:

–The forces that have restrained the economys recovery could fade
more rapidly than anticipated.

–A significant worsening of the banking and fiscal problems in
Europe could spill over to U.S. financial markets and greatly weaken the
economy here.

–Changes in fiscal policy that diverge from those in CBOs
baseline could affect economic growth.

CBO’s alternative fiscal scenario represents one possible set of
changes in fiscal policy. Under that scenario, real GDP would be
noticeably higher in the next few years than it is in CBOs baseline
economic forecast: CBO estimates that, with such changes in policy, real
GDP in the fourth quarter of 2013 would be between 0.5 percent and 3.7
percent greater than in the baseline forecast, and that the unemployment
rate would be between 0.3 and 1.8 percentage points lower. But, over
time, the resulting larger deficits would reduce private investment in
productive capital and result in real GDP that would fall increasingly
below the level in CBO’s baseline projections.

** Market News International Washington Bureau: 202-371-2121 **

[TOPICS: M$U$$$,MFU$$$,MCU$$$]

Blame cold feet ahead of tonight’s Chinese PMI data. We dropped as low as 1.0622 from 1.0674 barely a half-hour ago…

Soft US economic data (home sales, Chicago, PMI and consumer confidence) all are weighing as well.

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