Developed macro
1. Eurozone politics continue to dominate. The new coalition government will buy Greece more time, but political risks are still running high.
2. The other focal point is Italy where the shaky government faces bond issuance and a new vote on the 2010 budget this week – according to most observers, it may be only a matter of time before the government calls for early elections.
3. Eurogroup to discuss EFSF leveraging options today, on top of the official topics.
Interest rate strategy
1. The market understands the ECB now. The curve should revert to bull-flattening and bear-steepening.
2. European supply should prove no trouble this week. The bigger burden is on the Treasury market.
3. The T-Bond auction is worth particular attention this week.
FX strategy
1. USD likely to trade with a firmer tone as eurozone tensions set to remain elevated
2. EUR remains vulnerable to a lack of detail about the EU rescue plan
3. Expectations of follow up JPY intervention proven false so far
4. GBP continues to be favoured but could lose some steam this week.
Emerging markets
1. Sentiment: supported by progress in Greece but vulnerable amid G-20 disappointment and attention shift to Italian fiscal situation
2. This week’s data, especially out of BRICs, will point to gradual slowdown in EMs
3. Today, Taiwanese inflation to stay low, while Indonesian GDP growth – high
Commodity markets
1. Gold breaks higher on ECB rate cut and Greek fears….
2. …But safe-haven bid could be nullified by selling amid a liquidity crunch.
3. Base metals remain politically-driven as constructive fundamentals are sidelined.
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