- Moody’s: US faces negative outlook if tax deal adopted; fiscal negatives outweigh growth positives
- Bank of Spain’s Ordonez: Banks need to provide more data by year-end; restructuring fund still open if needed.
- Germany’s Schaeuble: E-bonds would increase long-term doubts on euro
- Moody’s: Outlook for UK banking system remains negative
- ECB buys EUR 2.7 bln of bonds in latest week; Total 72 bln since spring
- ECB may ask members states to double its paltry EUR 5.8 bln in capital
- US district court rules portion of Obamacare bill unconstitutional
- US yields fall 10 bp from intraday highs after rejecting Fibo at 3.37%; close at 3.29%
- Copper climbs to a record as China holds fire on rates
- S&P 500 sheds gains late, closes unchanged at 1240
EUR/USD was one-way traffic for much of the session, rallying through 1.3300, the 100-day average at 1.3352 and 1.3400 before eventually stalling just shy of the 13440 level, the top of the recent range. We reached 1.3433 before pulling back to the mid-1.3380s late in the day.
The euro was supported by the strong statement from German FinMin Schaeubel on Germany’s seriousness in maintaining euro stability, by Moody’s comments on the negative implications of the tax deal working its way through the US congress and from the sharp pullback in US yields after the failed to sustain the break of 3.37% in 10-yr note yields, a key technical level.
USD/JPY was hard-hit by the pullback in yields and another technical failure to overcome the 84.40 level. Stops were triggered below the 83.70 level and again below 83.40, falling all the way to Fibo support at 83.10 before steadying. We rebound to close the session around 83.40.
Cable was dragged up by EUR/USD, reaching 1.5896 but EUR/GBP was the bigger story, launching to the 0.8457 level after breaking back above 84.30 and triggering large stops. A suggestion from the BOE’s that more QE could be in the pipeline if needed combined with Moody’s negative outlook on the banks (plus mass euro short-covering across the board) help goose the cross.
AUD/USD was well-bid today, supported by fresh moves into commodities after China left its rates unchanged. We peaked at 0.9983, helping validate talk that solid selling interest is seen ahead of the 1.00 level. We end the day around 0.9950.
Heavy liquidation of USD/CHF longs helped push EUR/CHF lower today, a counter-intuitive trade given the strong EUR/USD rally. Markets in CHF were particularly thin today as many stay sideline ahead of year-end.
USD/CAD rebounded late in the session, shrugging off commodities strength as BOC governor Carney suggested CAD strength could keep inflation low. We end at 1.0080.