The EURO lost more ground in Europe Thursday after a disappointing Italian bond auction, while core government bonds and equities headed higher. Italy managed to raise just over EUR7B, against a maximum EUR8.5B target, with yields some 50-100 basis points lower than at the last auctions. However, after Wednesday’s hugely successful T-bill auction where yields were sliced in half, the market had expected more. The ECB lent a hand post auction, stepping in to buy Italian and Spanish bonds which eased yields and helped stabilize equity markets, but made no impression on the FX market. The USD remained bid on year-end demand, EUR/USD slumped to 1.2858, its lowest level since September 2010, while EUR/JPY printed a fresh 10-year low at 100.05. EUR/GBP fared a little better thanks to month-end buying, which pressured GBP/USD down to 1.5364, its lowest since early October. USD/JPY traded 77.67-77.87. On the data front Italian business confidence sank to a two-year low, while EU money supply and credit growth both slowed in November. March bunds are currently +0.46 at 138.67, March gilts +0.27 at 116.97. The main European bourses are up around 0.3%, gold sheds $21.20 to $1529.40/oz, its lowest since Independence Day, while Nymex is 25c higher at 99.64/bbl.
EasyForexNews Research Team