US regulator says that a US downgrade could affect the repo margin requirements. Even though the reference was to the trsy market and already covered by the ratings agencies last week, all things margined get clipped. Oil was already trading down after the bearish EIA number but even gold and silver were dinged. Liquidity warnings are usually USD bullish. Fitch is now weighing in on volatility should a US downgrade occur. Nothing new but nothing good either. Month-end EUR selling also filtering through.(IFR)
10:00 am EST. ISM Manufacturing PMI came out much weaker than expected. 50.9 vs 55.0 Price drop before news - possible leak?
EDIT: NEW YORK, August 1 (IFR)... EUR/USD got crushed down to 1.4185 given after Unicredit got downgraded by S&P (two subsidiaries debt downgraded to A-) Their shares dropped 3.8% and Italian 10-yr spreads blew out 20bp. Fears that debt contagion will spread have knocked equity markets down 1.05/1.30% as risk off has blasted through US equity marts, blasting away the nascent risk on buzz that had taken shape early in the session for hopes of a temporary debt ceiling extension.
So the ISM only helped to sell Euro which started earlier.
LONDON, Aug 3 (IFR) - The Swiss National Bank move to cut local target LIBOR bands to 0.0-0.25% and target the base of this newly tightened band has sent the Franc lower. The EUR/CHF rebound has hit 1.1105 amid the latest Swissie slippage, with EUR/USD moving into the 1.4250s to aid the ascent.
SYDNEY, Aug 4 (IFR) - The EUR/USD was given a lift late in the US session when the UK Telegraph revealed that EU officials expected the ECB to announce the resumption of sovereign bond buying in the secondary markets after 18 weeks of staying out. The responsibility of buying EU sovereign bonds was passed from the ECB to the EFSF two weeks ago when the EU announced their bailout package for Greece. Greek and Italian bonds have been slammed since then, as the EFSF does not yet have the authority and won"t do until the 17 euro zone countries ratify the changes, which could take weeks or months, according toe the Telegraph article. There has been talk that funds have opportunistically shorted Italian and Spanish debt knowing there wasn"t a suitable bridge to the handover of responsibility. If the ECB announces they will provide the bridge at their meeting later today - it could result in a recovery for Italian and Spanish debt, as it would reintroduce two-way risk in those markets and force short covering. The ECB is not comfortable in the role of sovereign bond buyer of last resort and there might be resistance to the idea. Now that the UK Telegraph flagged they will step up - a failure to do so would put even more pressure on Italian and Spanish bonds.
Japan intervened last night (9pm EST) to curb the surging yen and BOJ announced an expansion of its asset purchases by $63 billion (1am EST at the rate announcement). These actions allowed the Yen to fall to 80 per dollar for first time since July 12.
LONDON, Aug 4 (IFR) - A manic half-hour for the EUR with price slumping to 1.4152 from 1.4248 and then rebounding to 1.4240 as the Trichet rhetoric drives volatility. Initially the lack of reference to peripheral bond buying sank the EUR then the ECB chief's reference to the bond-buying program being on-going fired up the bid engines once more. There has been market talk that the ECB has bought Irish and Portuguese debt and the wires are suggesting this too. Still a nervous EUR and despite some hawkish over tones there appears to be some concern over an ECB tightening policy at this time, when growth doubts are dominating economic analysis.
No Italy or Spain bond buying, though.
Italian 10-year government bonds now yield 6.11%, up from 5.68% a week ago, when JPMorgan circulated a note saying Italy was at risk of running out of cash in September if it lost access to markets.
But the Treasury has "more than EUR60 billion" in liquidity stored at the central bank, a top-level official said.
SYDNEY, Aug 5 (IFR) - The EUR/CHF fell to a new all-time low at 1.0710 in early Asia, as a rumour made the rounds that Italy will seek a financial aid package from the EU as early as later today. There isn"t any confirmation that the rumour is grounded in fact, but markets are extremely nervous and the deteriorating debt crisis in Europe makes it plausible. The EUR/CHF has bounced all the way back to the US close around 1.0765, as shorts took advantage of stops being triggered below 1.0750 to take profit.
The euro spiked to a session high Friday against the dollar after a Reuters report that the ECB was ready to step in and buy Italian debt if the country commits to specific reforms. Reports say Italy has agreed.
|
Joined Apr 2009
|
Status: Junior Bastard
|391 Posts
(Reuters) - Doubts are growing in the German government that Italy could be rescued by the European emergency fund, even if the fund were to be tripled in size, according to the German newsmagazine Der Spiegel.
|
Joined Apr 2009
|
Status: Junior Bastard
|391 Posts
The ECB has been buying Italian and Spanish bonds on Monday-Tuesday.
"It was an important and welcome signal and brought short-term relief to markets," said Tobias Blattner, analyst at Daiwa Capital Markets, in a note.
But with Italy and Spain's combined refinancing needs totaling EUR660 billion until the end of 2012, "the most likely medium-term solution looks like a combination of continued market interventions by the ECB, and later the European Financial Stability Facility, so as to preserve market access by Italy and Spain," said Tobias Blattner from Daiwa Capital Markets.
|
Joined Apr 2009
|
Status: Junior Bastard
|391 Posts
worldradio.ch
Tuesday, 9 August, 2011, 09:39
Bern opts against currency measures
The Swiss federal government is opposed to intervening to curb the high value of the franc.
The seven-person cabinet decided at a special meeting on Monday that it won’t push further measures against the high-flying currency as it moved closer to parity with the euro.
The euro was trading at just under 1.07 francs, another historic low, in foreign exchange markets on Tuesday.
Swiss National Bank Chairman Philipp Hildebrand briefed the federal council before the meeting, following the central bank’s move to lower interest rates and increase market liquidity.
The cabinet said it approved of the bank’s action.
But it will review the currency situation again at a meeting on August 17.
|
Joined Apr 2009
|
Status: Junior Bastard
|391 Posts
U.S. Federal Reserve pledged in its FOMC statement to hold rates at record lows at least till 2013. Stocks up, USD down across the board, especially against CHF (USD/CHF low 0.7070, EUR/CHF low 1.0070)
