February 22nd, 2011 11:05:32 GMT

ECB Mersch:No Surprise If Council Sees Upside Infl RiskS: Bbg

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FRANKFURT (MNI) – The European Central Bank may warn that inflation
risks are tilted to the upside following the Governing Council meeting
next week, Council member Yves Mersch said in an interview with
Bloomberg News.

“I would not be surprised at most colleagues concluding that we
have upside risks to price stability,” Mersch said.

Council members have stepped up their inflation warnings in recent
days. So far, however, only Nout Wellink and Axel Weber have said
explicitly that inflation risks are already on the upside.

Mersch said that policy-makers could shift their stance next week
with respect to the economic outlook and say that risks are “slightly
tilted to the downside.”

–Frankfurt bureau, +49-173-6529-331; frankfurt@marketnews.com

[TOPICS: M$$EC$,M$X$$$,MT$$$$,MGX$$$]

February 22nd, 2011 10:35:24 GMT

EUR/USD spikes on hawkish Mersch comments – Bloomberg

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Bloomberg is carrying hawkish comments from ECB’s Mersch:

  • Excessively low interest rates can distort economy
  • ECB may reassess view on risks to economic outlook.
  •  Would not be surprised if ECB had to adjust language on inflation, conclude that we have upside risks to price stability
  • ECB will probably make exit statement at next meeting

EUR/USD has spiked sharply back above 1.3600 on the comments, presently at 1.3630.

UPDATE:  Sell orders seen up at 1.3650.

February 22nd, 2011 10:35:11 GMT

ECB Allots E119.455 Bln In 7-Day Funds At Fixed Rate Of 1.0%

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FRANKFURT (MNI) – The European Central Bank on Tuesday allotted
E119.4545 billion in its main seven-day refinancing operation at a fixed
rate of 1.0%.

The ECB satisfied all of the 189 bids received.

Today’s operation resulted in a net drain of E17.5604 billion after
the ECB allotted E137.0149 billion in its 7-day MRO last week.

–Frankfurt bureau. Tel: +49-69-720-142. Email: frankfurt@marketnews.com

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

February 22nd, 2011 10:05:36 GMT

EUR/USD steadies after early fall

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I’ve been getting recent reports ACB buying still being seen in EUR/USD.   ACB buying has also been seen in AUD/USD.  We’re up at 1.3570 and 1.0015 respectively.

As I’m typing this being told major US commercial bank is selling decent amounts of EUR/USD around the 1.3570 level.

February 22nd, 2011 09:56:00 GMT

UK Treasury Welcomes 1st Public Finance Surplus For Two Years

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LONDON (MNI) – The UK Treasury welcomed the January public finances
data, which showed public sector net borrowing excluding financial
interventions (PSNB-X) posting its largest surplus since July 2008 and
PSNB its largest surplus since January 2009.

The Treasury, in a statement, also said it would carry on with
deficit reduction.

“It’s welcome that this January saw the first surplus for the
public finances in 2 years, but it will take more than one month in
surplus to deal with borrowing of almost stg150 billion for this
financial year,” the statement said.

“The Government is determined to stay the course to deal with this
unsustainable borrowing, and keep Britain out of the financial danger
zone,” it added.

January has typically been a surplus month, due to large tax
receipts, but the PSNB-X reflected a deficit in January 2010.

–London newsroom: 0044 20 7862 7491; email: drobinson@marketnews.com

[TOPICS: M$B$$$,MI$$$$,M$X$$$,MFBBU$,MT$$$$,M$$BE$]

February 22nd, 2011 09:45:45 GMT

Spain PM:To Meet 2011 Deficit Target;Portugal Can Fund Itself

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FRANKFURT (MNI) – Spain has met its deficit target for 2010 and
will do so this year as well, Prime Minister Jose Luis Rodriguez
Zapatero said in a television interview broadcast Tuesday.

There is no doubt that Spain’s smaller Iberian neighbor, Portugal,
will be able to finance itself without resorting to external help, the
Spanish leader stressed to Reuters Insider TV.

Speaking through an interpreter, Zapatero conceded that though his
country is making progress economically, it still faces a daunting task
in generating employment. Unemployment hovered around 20% for most of
the last year, though trended slightly downward in Q4, according to
Eurostat.

Numbers to be released soon “will confirm that our deficit targets
have been met” for 2010, the prime minister assured. “We have done what
we have promised. And in 2011 we will also meet our target.”

“Realistically, we are winning the battle” to remain stable and
solvent, he assured.

“We’ve seen how sovereign debt tensions go in cycles, when there’s
problems with one country they tend to extend to other countries. For
that reason, we have to keep our guard up,” he said.

“But I do have the perception that in recent weeks and months Spain
has won the confidence of the markets,” he claimed.

“I am convinced that Portugal will be able to finance itself,”
Zapatero said. The upcoming meeting of Eurozone leaders on March 11
should serve as a way to support the embattled neighbor. “That will
certainly allow for the reduction of tensions” on Portugal’s sovereign
debt situation.

Portuguese Finance Minister Fernando Teixeira dos Santos told the
Japanese paper Nikkei that his country will not need to resort to the
European Financial Stability Facility to fund upcoming redemption
payments.

Queried if the recent defeat of German Chancellor Angela Merkel’s
party will weaken the chance of reforms being agreed for the European
rescue fund in March, Zapatero remarked that he had full confidence in
the chancellor.

“We must strengthen the Eurozone, which as a whole is supported by
the countries that make it up,” he said. “To do that we must strengthen
the parts and strengthen the whole and that is the aim of the task we
have ahead of us.”

Spain has had positive growth for four quarters, albeit weak due to
the harshness of austerity measures, Zapatero commented. But he remained
moderately upbeat, given that growth is coming mostly from exports.

This “is good news, that means that Spain’s economy is gaining
competitively, because we are exporting more,” he argued.

Spain’s “big challenge” is creating employment and boosting
confidence to a point that businesses feel that they can hire, the prime
minister said. “That’s the great battle we have to win in 2011, to start
to generate jobs, and it’s the hardest one.”

Both Spanish and Portuguese spreads are slightly wider on the day
in early European trading. Portugual’s 10-year spread versus the
benchmark German Bund is 4 bps higher on the day at +419 bps. Spanish
bonds are 1 bp higher at +217 bps.

–Frankfurt bureau, +49-69-720142, frankfurt@marketnews.com

[TOPICS: MT$$$$,M$X$$$,MGX$$$,MFX$$$,M$$CR$]

February 22nd, 2011 09:45:44 GMT

Analysis: Jan PSNB Posts Largest Surplus Since July 08

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–Jan PSNB ex financial interventions -Stg3.735bn; median Stg0.3bn
–Jan PSNB -Stg5.252bn vs -Stg0.095bn in Jan 10; median -Stg0.4bn
–Jan Current Budget Stg8.472bn vs Stg4.139bn in Jan 2010
–Jan PSNCR -Stg14.36bn vs -Stg6.183bn in Jan 09; median -Stg8.5bn

LONDON (MNI) – Public Sector Net Borrowing posted its highest
surplus for two and half years in January, as income and capital gains
tax revenues rose strongly, figures released by National Statistics
showed Tuesday.

The figures will be welcomed at the Treasury as they appear to show
a brighter picture of the public finances than most economists had
expected.

Excluding financial sector interventions PSNB stood at -Stg3.735
billion in January (a surplus) compared with a deficit of Stg1.266
billion in January 2010. This was the largest surplus since July 2008.

On an accrued basis, receipts growth was up 12.4% compared with
January a year earlier, the strongest since April 2010. Income and
capital gains tax receipts rose 18.9% on the year, the highest since
January 2005.

Given the strength of income tax and capital gains receipts, a
National Statistics spokesman cautioned that some of this strength in
self-assessment receipts may unwind in February, although he was not
sure this may happen.

The deadline for HMRC to receive self-assessment receipts is the
end of January, but the spokesman said that in practice quite a few
receipts also came through in February.

Receipts growth was nearly three times higher than spending growth
in January, a welcome turnaround in the figures, with spending up 4.4%
on the year.

For the financial year to date receipts were up 8.4% while spending
was up 6%.

Including financial sector interventions PSNB posted a surplus of
Stg5.252 billion in January, compared with only a Stg0.095bn surplus in
January 2010.

The Treasury has put the focus firmly on the excluding financial
sector interventions measure as it believes the fluctuations in the
value of the stakes it took in the banking sector distort the underlying
picture of the public finances.

The current budget excluding financial sector interventions posted
a surplus of Stg8.472 billion in December, up from Stg4.139 billion in
January last year.

The Public Sector New Cash Requirement posted a net repayment of
Stg14.36 billion compared with a repayment of Stg6.183 billion in
January 2010.

–London bureau: email: drobinson@marketnews.com

[TOPICS: MT$$$$,M$B$$$,MABDS$]

February 22nd, 2011 09:35:21 GMT

UK DATA: Jan PSNB ex financial interven. median……

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UK DATA: Jan PSNB ex financial interven. -Stg3.735bn; median Stg0.3bn
–Jan PSNB -Stg5.252bn vs -Stg0.095bn in Jan 10; median -Stg0.4bn
–Jan Current Budget Stg8.472bn vs Stg4.139bn in Jan 2010
–Jan PSNCR -Stg14.36bn vs -Stg6.183bn in Jan 09; median -Stg8.5bn
————————————————————————
Public Sector Net Borrowing (ex fin. interventions) posted a larger
than expected surplus in Jan as receipts growth rose 12.4% y/y, the
strongest annual rate since April 2010. Income tax and capital gains tax
receipts were up 18.9% y/y the highest since Jan 2005. The current
budget posted an Stg8.4bn surplus, the 9th highest surplus on record,
but well below the Stg17bn posted in Jan 2008. Overall these figures
will make happy reading at the Treasury who must have been concerned
that tax revenues would remain sluggish. This, though, is a good start
to the calendar year with receipts growth outripping spending growth
which was just 4.4% y/y.

February 22nd, 2011 09:32:32 GMT

UK January public finance data better than expected

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PSNCR -14.360 bln vs median forecast -6.0 bln. Biggest surplus since January 2009.

 PSNB -5.252 bln vs median forecast 0.7 bln. Biggest surplus since January 2009.

Cable up 10 pips post release, presently at 1.6170.  Guess there’s just no pleasing some people ;)

UPDATE:  Unusually strong annual growth in income tax receipts.  That would be all the bloody tax I’m paying then!!!!

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