Attention Turns To Fed
Markets continue to take Eurozone event risk in its stride as the EUR survived a day of shaky equity markets and slightly wider periphery spreads. In fairness, it appears that the bulk of the risk is being isolated to Italy and markets are responding in kind, but there could be some help on the way as the Fed begins its two-day meeting with some more balance-sheet easing on the offer heading into next year. We believe that there will be a net increase in asset purchases to the tune of $45bn per month, but markets appear either distracted by the fiscal cliff talks or simply unable to pin down a number due to the lack of discussion in general amongst policy circles. Regardless of the result, the headwinds will likely remain, especially with to further upside in USDJPY, as a more assertive Fed could hurt its momentum. Overnight loan data out of China was slightly softer than expected, though equities are still up on the day. Ahead the ZEW survey is due. EURUSD traded 1.2929~1.2962 and USDJPY 82.31~82.44.
Click here to read the full report: UBS Morning Adviser Europe
UBS Investment Bank