Keep an eye out for US consumer confidence data Risk looks stronger as Europe looks for a plan
If all the rumours and reports that we’ve been hearing over the last 48 hour are true, then the EFSF will be leveraged up and the EU will fund the debt ridden European banks via the European Investment Bank issuing bonds via a SPV that would buy European sovereign debt. Initial speculations suggest that the leveraged increase to the EFSF could be as much as 8 times. There is scepticism to the German resistance to more capital and leverage on bonds, given Merkel’s determination to solidify the euro though undoubtedly the political backing for this plan will likely influence her thirst for euro support.
The JPY market continues to trade in tight ranges, with movements dominated by risk on/off trade in the JPY crosses. Yet again overnight we have seen comments from Japanese authorities that measures will be implemented to curb the strong JPY but again the market seems to be uninterested until we see any action. With settlements at the end of the month coming closer for Japanese exporters and the break-even rate used to calculate profits being 79.40, the market will test the BoJ’s resolve on the JPY appreciation as the deadline date draws closer and closer.
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