- Early rumours of an IMF Italian loan, to tune of EUR600 billion, causes significant risk reversal
- Many doubted this story as IMF isn’t thought to have this amount of money
- Story apparently denied late in session causing EUR/USD and AUD/USD to fall sharply
- Regional equity markets get a big boost from very upbeat retail sales activity in the US last Friday
- Equities +1.75% on average; Gold and Oil +1.25%
- France and Germany pushing hard for more fiscal integration; may settle for 17 EUR members agreement rather than full treaty change from all 27 members
- ECB’s Noyer: Makes speech in Tokyo, sticks to recent ECB line
- New Zealand government easily wins general election
Relatively busy session in Asia with risk returning to the markets, primarily as a result of the strong retail sales activity in the US last Friday, but the IMF-Italian loan story also helped kick things off.
EUR/USD opened higher in Asia on the back of a since-denied story linking the IMF to a loan to Italy, worth EUR600 billion. The story seemed to start online and gain credibility without ever being sourced, and even the denial has been hard to find. EUR/USD traded to 1.3325 in early interbank trade, fell to 1.3290 when the retail market joined in, was dragged higher again as a rampant AUD/USD surged higher, but fell back below 1.3300 on the IMF denial. Ranges: 1.3274/1.3334
AUD/USD gave a sign of things to come on Friday when it failed to fall despite a much weaker EUR/USD and this proved to be a portent of strength to come as the pair opened 100 pips above it’s .9700 closing level and hasn’t really been able to get back below .9800. The early high was at .9830, it fell back to .9800, rallied to .9888 and then fell swiftly to .9825 on the IMF denial. Overall range: .9787/.9888
USD/JPY has been at the mercy of EUR/JPY which has been capped by strong sell orders at 103.50. Stops are eyed in the cross above this level and real money players continue to sell the Yen. Ranges: EUR/JPY 103.03/50; USD/JPY 77.42/71
Cable has been supported by buy orders near 1.5450 and by expected demand ahead of the MSCI semi-annual review. Ranges: 1.5464/1.5525; .8570/.8605
USD/CHF .9253/97
