Euro Holds Gains
EURUSD consolidated its recent gains overnight and pushed to a new two-week high, trading in a 1.2929-1.2973 range. The latest China Flash PMI for January was benign and not market-moving. The triggers for the latest bout of euro strength are clear: Spanish and French auctions were taken favorably by the markets. The IIF will also continue discussions on Friday and a deal is already expected, though wires have suggested several different proposals remain on the table. The troika have clearly stated that there won’t be fresh funding for Greece’s upcoming payment requirements until the PSI is settled, and a satisfactory resolution removes one further barrier towards crisis resolution, though from a wider standpoint, macro adjustment throughout the Eurozone must be a priority and on this front good news will be far harder to come by. For example, there is no guarantee that Greece will embark on a sustainable debt path post-PSI. In addition, scrutiny over the fiscal compact will return, and reports suggest again that the final agreement may not prove as watertight as agreed during the initial discussions, as once again allowances for ‘exceptions’ are being made. Late during the US session, Moody’s warned that while a disorderly default in Greece is not their ‘central case view’, the probability is rising. UK retail sales figures are due in the UK, and CPI figures are due in Canada. USDJPY traded in a 77.06-77.24 range.
Click here to read the full report: UBS Morning Adviser Europe
UBS Investment Bank