Daily Market Report 20/09/12

In the last year the disparity between the peripheral and the core euro zone has made itself abundant. Despite the shared currency, investors in the troubled nations have pulled more than €300bn from bank deposits, with a similar amount being deposited in the more dependable economies’ accounts, such as Germany and France.

During these twelve months, peripheral economies such as Spain, Portugal, Ireland and Greece have seen a hemorrhaging of bank deposits to an extent that creates great uncertainty. Previous optimism within the euro area has now been quelled as investors flee from the problematic areas into safer ones, an issue that is a key driving force behind Spain’s rising bond yields and the euro’s general negative outlook.

This trend could be compounded in the early in the day as German PMI figures are released, whilst Spain’s ten year bond auction could provide the greatest indication as to how close the region is to obtaining ECB funds.

Taking a view from recent days’ lessons, if we expect a surfeit of euro risk then we could well see greater dollar strength on the euro decline. The time to buy dollars may be sooner rather than later, whilst those ready for the euro’s fall from grace could finally be ready to push it over the edge as the more perspicacious read the early signs.

Today’s Key Announcements:

  • 08.00am – EUR – French Flash Manufacturing PMI: Figures well below expectations at 42.6
  • 08.30am – EUR – German Flash Manufacturing PMI: Index above previous and expected level, 47.3
  • 09.30am – GBP – Retail Sales: 0.3% reduction expected
  • Tentative – EUR – Spanish 10y Bond Auction 13.30pm – USD – Unemployment Claims: Expected reduction in unemployment claims
  • 15.00pm – USD – Philly Fed Manufacturing Index: Improving yet still negative level expected
  • 19.00pm – GBP – Mervyn King, BoE Gov Speaks

See previous Daily Market Reports