• US CPI falls 0.1% in October; core rises 0.1%
  • US industrial production rises 0.7% in October; Capacity use 77.8%, highest since July 2008
  • US attracts $68.6 bln in net foreign investment in September in wake of S&P downgrade, Europe turmoil
  • Irish PM: Only the ECB has capacity to provide a firewall for Europe
  • BBG: ECB buying Italian and Spanish debt almost exclusively
  • Nat’l Assoc of Homebuilders index rises to 20 from 17 in October
  • Troika says to approve EUR 8 bln payment to Portugal after passing inspection
  • Monti sworn is as PM; to face confidence vote on Thursday evening
  • Greek PM: Crisis has spread from periphery of Europe to the core
  • Papademos wins confidence vote 255-38
  • Eurogroup’s Juncker: Germany’s debt level worrying; larger than Spain’s
  • Greek budget deficit rises 11% in first 10 months of year versus a year ago
  • French FinMin: ECB support is best way to combat crisis
  • IMF European section head Borges resigns effective immediately
  • Fitch: Euro zone contagion, if it worsens, poses risk to US bank ratings
  • WSJ: European banks having USD funding problems on a par with late 2008
  • Spanish FinMin says won’t meet GDP targets for 2011 but rules out need for a bailout
  • S&P 500 falls 1.7% to 1237
  • US 10-year note closes at 2.00% yield, down 5 bp; Italy steady at 7%
  • WTI rises $2.35 to $101.72; gold falls $18 to $1763

A pretty volatile session which saw EUR/USD close out the session on its NY lows, at 1.3452. We slumped a cent in the final 2 hours of trade as sovereign debt and bank funding jitters undermined US equities and gave the dollar a safe-haven boost. As we have seen during past funding squeezes, banks which can’t borrow dollars often just end up buying them…

Like EUR/USD closing below 1.35 for the first time in more than a month, EUR/JPY closes below 105.00 for the first time since Oct 10. It ends the day at 103.70.

Commodity currencies traded firm on the back of upbeat US economic data and a soaring WTI price early in the day, only to crumble late in the day as risk-aversion exploded. Concerns that the European bank funding crisis has reached critical proportions spilled over into the US financial sector late in the day after Fitch warned that Europe’s woes could hit US banks and the Journal highlighted a spike in euro/dollar basis swaps.

Risk-on became risk-off in a hurry and USD/CAD jumped from an abortive test of 1.0160 support to close up at 1.0235.