Euro Rally Fades
The euro drifted lower in the European session after investors were slightly disappointed by Friday’s Italian auction. The 3-line auction came in at the top of allocation estimates (the full EUR 3 bn was allotted for the 11/2014 BTP). However, this was a relatively small size auction for Italy at this time of year, especially with its elevated funding requirements for Q1. An element of disappointment may also be due to the very strong Spanish results yesterday. The move lower in the euro follows a strong rally yesterday and underlines our cautious view. With relatively stretched positioning, relief rallies are inevitable, and although there is scope for further risk rallies in the Eurozone periphery debt markets, the fundamental picture has not changed. We remain short EURUSD as a trade recommendation. Trade figures are due out in the US and Canada, along with the University of Michigan Confidence reading. EURUSD traded in a range 1.2879-1.2775, USDJPY 76.84-76.66, while equity markets in Europe were slightly higher at the time of writing.
Click here to read the full report: UBS Morning Adviser America
UBS Investment Bank