1) Overnight Wrap
With no new debt ceiling deal in place in the US, the markets opened weak in Asia with equity futures trading down 1%. Gold and CHF were the large gainers as investors fled for safety. Gold made new highs taking out stops and jumping to 1624.
In Currencies, the morning began thin and whippy with the stops lower in USDJPY the first target. USDJPY raced to new lows 78.12 However large bids at 78.00 and 78.10 held the market as the market as we washed 30 – 50 the rest of the day.
After consolidating from the initial USD sell off, Australia PPI came out close to expectations at .8% (consensus .9%) with no reaction in the market.
Later, BOJ’s Shirakawa spoke at an event in Tokyo stating nothing new or unexpected: “Watching markets closely”, “Higher Yen has has merit of lowering import costs”, and “Watching impact of base year change on CPI”.
Equities remained down 1% throughout the day, and we traded sideways the rest of the afternoon awaiting the next round of headlines to come. With Hilary Clinton in China this week, we were looking for a lower dollar /yuan midpoint, however the opposite happened (+8 pips) with again no reaction in the market. Hilary did comment that she is “Confident Congress will reach a debt deal” and an unnamed PBOC advisor echoed her sentiments (below).
A quiet afternoon Asian session…
2) Orderbook and Flow
EURUSD remains fairly sparse with offers above collecting 1.4450-70.
USDJPY is starting to see a large increase in bids and stops below positioned below 78.00
USDSGD is skewed with offers above from 1.2100 up with little to the downside.
No large overnight flows and we were net sellers of AUDUSD.
3) USD/Asia Run
USDKRW 1058.0 (Friday morning mids 1052.5)
USDINR 44.57 (44.49)
USDPHP 42.57 (42.46)
USDCNY1y 6.3785 (6.3800)
USDIDR 8535 (8530)
USDMYR 2.9805 (2.9795)
USDTWD 28.80 (28.80)
USDSGD 1.2080 (1.2090)
4) Moody Downgrade of Greece
DJN-DJ MOODY’S DOWNGRADES GREECE TO CA FROM CAA1, DEVELOPING OUTLOOK
DJN-DJ MOODY’S DOWNGRADES GREECE TO CA FROM CAA1, DEVELOPING OUTLOOK
DJN-DJ MOODY’S: EU SUPPORT PROGRAM, DEBT EXCHANGE PROPOSALS IMPLIES PRIVATE CREDITORS TO INCUR SUBSTANTIAL ECONOMIC LOSSES ON GREECE GOVT DEBT
DJN-DJ MOODY’S: DEVELOPING OUTLOOK ON GREECE RATING REFLECTS UNCERTAINTY ABOUT EXACT MARKET VALUE OF SECURITIES IN EXCHANGE
The following is a press release from Moody’s Investors Service:
London, 25 July 2011 — Moody’s Investors Service has today downgraded Greece’s local- and foreign-currency bond ratings to Ca from Caa1 and has assigned a developing outlook to the ratings. The combination of the announced EU support programme and debt exchange proposals by major financial institutions implies that private creditors will incur substantial economic losses on their holdings of government debt. The rating’s developing outlook reflects the current uncertainty about the exact market value of the securities creditors will receive in the exchange.
HSBC Global Research