1) Asian session summary
G10 trades sideways for most of Asia with the only moves occurring in the very early hours before most had woken.
AUD opened a little softer (25pts) in very early Sydney/Wellington trade following a weaker Chinese Non-manufacturing PMI release over the weekend (49.7 vs prev 57.7), AUDUSD touching 1.0185. This move was very brief as Italy’s Cabinet approved Monti’s austerity measures aiming to achieve €24bn in savings through budget cuts and tax increases, with the majority of these captured in 2012-2014.
The Sunday Times, and a reuters article, reported that the ECB is preparing a €1trn Rescue Fund which could be implemented if broader agreement is reached on greater fiscal integration/regulation at meetings this week {http://xrl.us/bmj8d4} and {http://xrl.us/bmj8en} . Both of these seeing risk well supported as S&P futures open +9pts (0.7%), AUD bounced to 1.0272 and EUR touched 1.3441 highs all on thin volumes.
USD/Asia had a strong start and this resulted in AUD retracing back to settle 1.0220 as 1m KRW touched 1136, and EUR settled 1.3410/15 while stocks largely held onto their gains.
Across the spectrum market participants seem increasingly reluctant to carry risk into what is shaping up to be an event-loaded week, starting with Merkozy meeting for lunch today at 1:30pm Paris time, with an expected press conference shortly after. RBA, BOE and ECB meetings with the European summit at the end of the week will surely provide more of the Risk On/Risk Off volatility we have become accustomed to of late. Having been disappointed by European ‘Solutions’ before and approaching calendar year end, its not surprising to see the lack of participation from speculative accounts.
2) Orderbook
EURUSD: Good Prop Bids building below around 1.3300/1.3330. Topside a little more two-way but generally an interest to fade any rally to 1.3500
GBPUSD: Corporate offers above around 1.5800
USDJPY: Corporate and CTA offers above around 78.15/50
3) USD/Asia run
USDKRW 1131 (Friday London Open level 1132)
USDINR 51.71 (51.70)
USDPHP 43.33 (43.28)
USDCNY1y 6.3880 (6.3850)
USDIDR 9090 (9120)
USDMYR 3.1445 (3.1330)
USDTWD 30.20 (30.15)
USDSGD 1.2835 (1.2847)
HSBC Global Research