- Moody’s takes rating actions on Spanish banks. Santander unaffected by banks downgrade
- Euro zone March manufacturing PMI 57.7, weaker than median forecast 58.4. Services 56.9, stronger than median forecast 56.4
- UK February retail sales -0.8% m/m, weaker than median forecast -0.6%
- Moody’s: Continued UK commitment to fiscal consolidation critical to AAA rating
- BOE’s Dale: 2011 growth around average levels, inflation above 4% and loose monetary policy means rates should rise (he has been voting for 25 bps rate hike so rhetoric no surprise)
- China says since last year has taken euro debt problems seriously, has taken steps to support Europe
- LCH clearnet raises margin requirement on Irish sovereign bonds to 35%
- Portugal unlikely to ask for bailout at EU leaders summit, but it cannot be ruled out – EU source
- Portuguese 10 year govt bond yield at new euro life-time high of 7.912%
- Italy March consumer confidence falls to 105.2 from revised 106.3 in February, weaker than median forecast of 105.5
- Honda to extend suspension of car output in Japan until April 3
- Euro zone letting slip a grand chance – WSJ
Well that morning hummed along nicely.
EUR/USD up at 1.4125 from early 1.4085 having been as high as 1.4135. However it hasn’t all been plain sailing for the single currency. EUR/USD initially dipped with periphery fears to the fore.
Buy orders were well-touted in the 1.4050/60 area. And when the BIS turned up buying around 1.4055 that was pretty much that. Reports quickly came in that Middle East was buying again (shock horror) and we were off to the races. UK clearer also notable buyer (same bank also seen aggresivley selling cable, leading market to conclude they had lumpy buy interest in EUR/GBP to execute)
Macro funds jumped on the bandwagon and stops were tripped through 1.4090 and we were quickly over 1.4100. We’ve been as high as 1.4135, but Asian central bank sales in the low 1.4130’s have helped cap rally so far. (UPDATE – Being told Asian was China)
More sell orders noted 1.4140/50, stops above there.
Cable down at 1.6180 from early 1.6230, having been as low as 1.6147 in wake of crappy retail sales data (see above.) Cable was on the defensive right from the get go. UK clearer with strong connection to the Far East was reported selling early. They were also seen buying EUR/USD leading market to conclude they had decent EUR/GBP buy interest.
There were early morning rumours of a worse than expected UK retail sales number and they proved correct. The data accelerated the sell-off down to session low 1.6147 where the Reserve Bank of India stepped in buying, lending the pairing some much-needed support.
EUR/GBP up at .8730 from early .8675, having been as high as .8743. Moody’s comments on UK’s AAA rating (see above) will have sent a shiver down sterling bull spines. Hawkish comments from BOE’s Dale were totally ignored. Market well aware he wants a rate hike.
USD/JPY unchanged at 80.95. Rumour BOJ checking rates (that old favourite) was greeted with a yawn.
