Daily Market Report 19/09/12

The pressure of Spain’s bailout woes weighed heavily on the euro yesterday as the common currency traded a loss against its major counterparts. The decline marked an unusual frailty that euro owners will have become unfamiliar with in recent weeks.

Although short-term bond yields in Spain receded and German economic sentiment improved, Mariano Rajoy and the ECB remained obdurate in their opposing fiscal attitudes. Though some believe a Spanish bailout to be inevitable, the negotiations span another day at least and it seems now this standoff is perturbing investors.

Perhaps coupled with the corrections from last week’s dollar regression, this disquiet in the euro zone has helped the greenback show signs of strength against its rivals for the second day running. Markets could see a third day of strength if existing US home sales and building permits data, released this afternoon, arrive higher than anticipated.

Meanwhile in Japan, the developing sub-story of recent days, the yen saw early strength yesterday morning as it has for a consistent period. As the fiery political battle with China heats up, the Bank of Japan, keen to retain its position as a net-creditor, was reluctant to allow further strengthening of the yen.

Meeting in the early hours of this morning, the Japanese central bank opted to increase its asset buying fund by 10 trillion yen ($127bn) sending the Japanese currency to a four week low against the dollar and weakening against the majority of other major currencies.

Key Announcements Today:

  • Tentative – JYP – Overnight call rate: rates stayed at less than 0.1%
  • Tentative – JYP – Monetary Policy Statement: announcement of stimulus
  • 09.30am – GBP – MPC meeting minutes
  • 10.00am – CHF – ZEW Economic Sentiment
  • 13.30pm – USD – Building Permits: expected to marginally decrease to 0.79m
  • 15.00pm – USD – Existing Home Sales: an expected increase from 4.47m to 4.57m

See previous Daily Market Reports