Political Jawboning Trend Change? - The Euro jumped to one week highs against the USD after Spain was able to easily sell 3 billion Euro worth of five-year bonds via auction. This came after Portugal's own successful bond auction on Wednesday. Also Italy successfully raised the money it was looking for in the bond markets today. The real story here however was yesterday's political jawboning by every and any political figure pledging to do what ever it takes to support the Euro and to stop the debt contagion from spreading. Here is a prime example, German Finance Minister Wolfgang Schaeuble said on Wednesday that euro zone countries are working on a "comprehensive package", which may be agreed by February or March, to solve the bloc's debt crisis. Of course the fact that the ECB was hitting every bid in sight in the bond market, which drove down yields, didn't hurt either. Was all of this enough to change the trend and place a floor under the Euro? Only time will tell. Elsewhere, the CHF took a nose dive after Swiss National Bank Vice President Thomas Jordan said that the recent appreciation versus the Euro poses a threat to economic growth this year. This has put the market on notice that the SNB may intervene. The last time the SNB intervened to weaken the CHF it lasted for over a year before being abandoned June of 2010. Meanwhile, the GBP managed to move higher after the Bank of England kept its main interest rate and emergency stimulus program unchanged. In Asia, the USD was little changed against the Yen, while the AUD was finally able to muster a gain as stronger commodity prices help to negate a surprisingly small rise in employment data. In Canada, the CAD was slightly lower but remained well above parity. Yesterday, Finance Minister Jim Flaherty acknowledged that the CAD will hover at parity with the USD for some time to come, and deservedly so thanks to Canada's economic strength. Flaherty went on to say that "It is unreasonable, given those fundamentals, for anyone in Canada to expect the CAD to go back to the days when it was significantly devalued vis-a-vis the USD.... it makes sense for the CAD to be much closer to the USD that it was for some years." That's why Ottawa is throwing a lifeline to exporters and manufacturers by lowering corporate taxes, reducing tariffs and extending an accelerated capital cost write-off, Flaherty said.
No comments:
Post a Comment