Auctions Support Euro
Spanish and French auctions were taken favorably by the markets and the euro pushed higher in the European session. EURUSD has now rallied 2 and a half big figures since Friday’s S&P downgrades and marginally riskpositive headlines are being taken well by investors. This suggests that the risk rally has further to go, unless talks between Greek officials and the IIF break down dramatically before this weekend. On that note, we have had little new information and talks are still underway. We remain cautious on a structural basis however and view this rally as temporary. The Spanish treasury managed to issue EUR 6.6bn, once again above initial estimates. In the past two weeks, the treasury has now issued almost EUR17bn of bonds, which constitutes around 20% of their yearly issuance, a clear positive sign for the European fixed income markets. Earlier, both AUD and NZD fell after a pair of disappointing domestic data releases. EURUSD traded 1.2835-1.2918 and USDJPY 76.69-76.85 during the European session, while equity markets extended their recent gains. Ahead today, the US releases CPI data. Price figures may attract more attention in the US in the short term as there is talk of an explicit inflation target being adopted by the Federal Reserve.
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