There were two major developments over the past 24-hours, one in Asia and one in Europe. Yesterday after US equity markets closed, Standard & Poor’s announced that it had cut the Spanish sovereign debt rating to ‘BBB-’ from ‘BBB+’, bringing the nation to the brink of ‘junk.’ Yes, that’s right: Spanish debt is still considered investment grade paper. Although the Euro reacted quite negatively to the news (a downgrade from Moody’s Investors Service was expected, not from S&P), it has since rebounded on the sentiment that any additional bad tidings could force the government into seeking a bailout via the European Stability Mechanism (ESM), which came online Monday. This would also pull the European Central Bank into the market as a lender of last resort for Spain, given its unlimited sterilized bond-buying program.
In Asia, data showed that the Australian labor market made strides forward in September, despite a sizeable increase in the Unemployment Rate: jobs were added at a quicker pace than previously thought; and the participation rate, a gauge of the population in the labor pool, increased as well (hence the jump in the Unemployment Rate). Considering that Australia’s largest sector is mining, this is a welcomed development for a nation whose fate is very much tied to the Chinese growth picture. It is of little coincidence that the Australian Dollar leads as more evidence gathers that fears of a Chinese “hard landing” are overblown in the near-term.
Taking a look at credit, peripheral European bond yields are mixed, holding back further intraday Euro strength. The Italian 2-year note yield has decreased to 2.294% (-0.3-bps) while the Spanish 2-year note yield has increased to 3.217% (+2.6-bps). Similarly, the Italian 10-year note yield has decreased to 5.059% (-2.8-bps) while the Spanish 10-year note yield has increased to 5.768% (+0.7-bps); lower yields imply higher prices.
While there are numerous American and Canadian data releases this morning, there are only three that are worth paying attention to. At 08:30 EDT / 12:30 GMT, the weekly USD Initial Jobless Claims (OCT 6) report is due, with claims hovering near recent levels; at this rate, October jobs growth looks to be in the area of +105K to +125K per month. Also released then is the USD Trade Balance (AUG), which should show a wider deficit despite a weakening US Dollar throughout the month. Finally, in the second half of the North American trading session, the USD Monthly Budget Statement (SEP) is forecasted to show a surplus.
quoted from: http://www.dailyfx.com/forex/technical/article/morning_slices/2012/10/11/Weak_US_Dollar_Gives_Way_to_Aussie_Euro_Rebound_Gold_Higher_as_Well.html
0 comment(s):
Post a Comment