10 January 2012 at 14:57 GMT
The markets continue to display an eery calm, given the threats and uncertainties that lurk around every corner. The EURUSD cross has shown mild strength to reach a high of 1.2818 thus far and stands at 1.2790 at the time of writing, from an intra-day low of 1.2743. Flourishing as usual amid calmness, and bouyed by strong construction industry figures, AUDUSD is up over a cent, at 1.0350, from yesterday's close.
CHF debate continues
The chief story still gripping the markets today, (in what is admittedly a quiet session, without major data releases), is whether the successor to Swiss National Bank's former President Philipp Hildebrand will pursue a weaker Swiss Franc with the same zeal. Deputy President Thomas Jordan is temporarily in command and is emerging as the favourite for the role on a permanent basis. After a brief flirtation with 1.2100 earlier on, EURCHF has moved to a day's high of 1.2140 at the time of writing. For what it's worth, my opinion would be that Hildebrand's departure changes nothing. Jordan was also closely associated with the imposition of the 1.2000 floor against the Euro and, faced with rising unemployment and negative, and falling, inflation, why on earth should Jordan go soft on this? If anything, one might expect him to want to stamp his authority on affairs and this may include a hike in the floor at some point; the trigger for this could be a fall in consumer's inflation expectations and timing could centre around the next SNB rate-setting meeting on March 15, but a move could come anytime. If you believe that the Eurozone authorities will ultimately do what it takes to save the Euro in its present form, as we do, (admittedly following a Perfect Storm of pressure first, to spur them into action), then you should also believe that the SNB would ultimately be very happy with Euros bought at 1.2000, or even 1.3000.
Euro news
Euro news is pretty lean, with markets prepared to wait and see before taking further judgement on the current Grand Plan - the Fiscal Compact, the missing details of which we are now promised before March 1. Yesterday's 'Merkozy' meeting also confirmed the intention to have the European Stability Mechanism up and running by mid-year, meaning that hard cash will have to be stumped up by 'donor countries' sooner rather than later. Next week the Troika returns to Greece, and, meanwhile, negotiators continue to try to persuade private investors to take more than the 50 percent haircut intially envisaged as their contribution to Greek debt reduction. So many arms in danger of being twisted right out of their sockets!
This morning saw the release of mild positives, in the shape of robust French Industrial Production figures and comments from the Fitch rating agency that France's AAA rating would probably survive 2012 intact.
US news
A continued uptick in the NFIB Small Business Optimism index to 93.8, as expected; the highest level since February 2011.The US economy continues to mildly outperform expectations, but for how long, given impending tough decisions on fiscal policy? The most important and imminent being the debate as to whether to extend the Bush payroll tax cuts yet again, although this does stand a very good chance of being passed into legislation.
Economic Data Highlights
• BoJ supplies Tokyo market with $12.556 bln in 3-mo USD funds, largest USD supply since '10, $2.961 bln in 1-week funds also lent out.
• Japan Honda to make new Acura brand sports car in Ohio, produce hybrid vehicles in the US - DowJones, Jiji.
• China Dec trade surplus $16.5 bln, $8.78 bln eyed, exports +13.4% y/y, imports +11.8%, +13.5% and +17.0% eyed.
• Moody's - EMEA high-yield corporate likely to experience further negative rating actions in '12, buyers' market.
• UK Dec RICS house price balance -16, highest since Jun '10, -19 eyed, Nov -17.
• UK Dec BRC like-for-like retail sales +2.2% y/y, +0.1% eyed, Nov -1.6%; one-off factors cited; total sales +4.1% y/y, Nov +0.7%.
• Australia Nov bldg approvals +8.4% m/m, +7% eyed, -18.9% y/y, private houses +4.8% m/m.
• NZ Nov new dwelling consents -6.4% m/m, -5% y/y, Oct rev -10.7% m/m.
. France Industrial Production +1.1% m/m, +0.9% y/y, exp. -0.2% and -0.4%
. US NFIB Small Business Optimism 93.8, as expected
Upcoming Economic Calendar Highlights
. US IBD/TIPP Economic Optimism, exp. 45.3 (15.00)
. US JOLTs Job Openings Survey, prior mth. 3.267m (15.00)
. US Wholesale Inventories, Nov., exp. +0.5% (15.00)
• EUs Rehn to speak in Brussels (14:00)
• Feds Williams to speak in Washington (15:30)
• Feds Pianalto to speak in Ohio (16:10)
• Feds George to speak in Missouri (18:00)
• BoJs Shirwkawa to speak in London (18:30)
• Merkel meets IMF’s Lagarde in Berlin (19:00)
• USTs McRaith to speak in New York (21:30)
• USTs Geithner visits Beijing for talks