China Rhetoric Boosts Euro
China’s central bank governor Zhou said China would continue to invest in Eurozone sovereign bonds and would play a bigger role in solving Europe’s crisis via both the IMF and the EFSF. As usual, the comments were short on specifics, but they helped the euro recover from yesterday’s selloff, and carried AUD and NZD higher too. Zhou also expressed his wish that the euro will become a bigger and more important reserve currency. USDJPY held onto yesterday’s gains but couldn’t make much further headway despite closing above the 200-day moving average for the first time in 10 months. EURUSD traded 1.3080-1.3185 and USDJPY 77.36-78.66 since Tuesday’s European close. There was no further news on yesterday’s developments in Europe which had triggered concern over whether a second Greek rescue would ever happen. The face-to-face meeting of Eurozone finance ministers which was planned for today (but which was cancelled yesterday) has not been reinstated, and the plan is still to hold a teleconference instead. Important decisions on Greek funding have been made via teleconference before, but it seems more likely that any decision to go ahead with a second Greek rescue will be deferred until Monday’s regular monthly meeting of Eurozone finance ministers. The Wall Street Journal reported that a tentative agreement has been struck between US congressional negotiators on extending the payroll tax cuts and unemployment benefits through to the end of 2012 – both measures are due to expire on Feb. 29 unless extended. Ahead on Wednesday, headlines around the Eurogroup conference call are the key focus but macro releases are also due, including German and Eurozone GDP, the UK employment reports and the BoE Inflation Report, as well as the FOMC minutes.
Click here to read the full report: UBS Morning Adviser Europe
UBS Investment Bank