Can We Bore the EUR into Submission?

Are market participants in the midst of surrender? It’s so dead out there. The daily ranges are practically non existent, and it’s boring, so boring that it takes an effort to provide a colorful diatribe for the very few that remain behind to man the execution platforms. Analysts could make up market material but, there is hardly anyone left to listen, so they are left to recycle news and stretch trading scenarios and the truth a tad. With the frustration rant over, this markets remains on autopilot amid a lack of new news or issuance from Europe. Even the rumor of a Chinese stimulus package on the horizon failed to register a pulse on any heart monitor.

Big picture, markets remain unconvinced that Europe “will act to support sovereign markets in Italy and Spain, but are wary that plans for ECB and EFSF bond buying could still be progressing in the background.” So, it looks like both dealers and investors are in ‘check’ position for now. One positive development has been the confirmation that the German constitutional court will provide its ruling on the ESM on September 12 as previously planned, irrespective of the new call for delay that was brought earlier this week.

Other tidbits on the Euro horizon this morning indicate that the German government is adamant that Greece must comply with the reform and austerity conditions agreed to in its +€130b rescue package. Merkel is busy playing politics it seems, she has not yet firmly rejected any debt repayment terms Greece faces yet. Greece selling 13-week T-bills to finance bond repayments next week were mostly bought by the countries debt laden banks. In turn, these institutions are being financed by ECB loans. Surely this should be ticking someone off in the Euro administration? It’s like a giant ponzi scheme! It seems that Spain is allowed to dip its hand into the cookie jar a tad earlier to receive an emergency disbursement from the +€100b bailout of its financial system because of limits the ECB imposed last month on repos of government guaranteed bonds. If you move the right hand often and quick enough no one gets to see what the left is doing.

Again the market has been mostly UK watching this morning. Retail sales (+0.3%) increased more than expected last month, and this despite earlier feed back suggesting that the Olympic games had no affect on trade. Constantly telling the masses to give London amiss for the past few years did not seem to work. Even the June headline got a boost, jumping from +0.1% to +0.8%. This strong data will be a blow to the doves who are calling for more UK QE in November.

Euro CPI data did not even flinch this morning. It held steady at +2.4% for the third consecutive month and just above the ECB’s annual target rate. For the 17-member Euro-zone it happened to fall -0.5% on the month compared to -0.1% in June. The consensus believes that there is little sign of an imminent rise and as such, inflationary threats are not seen as a threat to the CBanks plans to boost the regions ailing economy. State side, the Philly Fed will be closely watched, especially after yesterday’s disappointing Empire showing. The market will probably have skewed their expectations a tad lower after the horror showing yesterday. Weekly claims will also have a spot light on her. It is the second week of “clean” data, untarnished by “auto plant shutdown distortions.” Analysts continue to argue the point “while stronger numbers would still be helpful for risk appetite, the benefits are tempered as QE expectations dim.”

The overall market remains relatively short in anticipation of deeper losses in the coming sessions. The retail sector above, has decided to go small long at current levels despite genuine interest to sell EUR’s back towards its old support levels which now become resistance, first up 1.23. More neutral selling interest appear at 1.2340 trough 1.2370. Medium term bias continues to look to the downside as these lofty heights remain uninspiring.

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News Drought No Friend of EUR

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