Good Bank, Bad Bank, & Forced Majeure - Europe's debt crisis returned front and center to the mind's of traders today after the Irish Independent, a Dublin based newspaper, reported that Switzerland's central bank (SNB) refused to take Irish government bonds due to be repaid between 2011 and 2025 as collateral. Funny how the ECB (bad bank) will take Irish, Greece, and Portugal government debt for collateral on repos but not the SNB (good bank), what kind of message does that send? On the bright side, Portugal was able to auction bonds today but at much higher rate than its previous auction in early September. We should continue to see pressure on the Euro as debt crisis continues from one nation to the other. In Asia, the big story is the AUD. After hitting a 28-year high last week, the AUD has fallen about 2.7% against the USD as investors fear that widespread floods in the country's northeast will hit economic activity and about 20%of Australia's export revenue. Record rainfall has caused floods the size of Germany to destroy cotton crops, halt coal deliveries, and shut down mines prompting BHP and Rio Tinto to declare force majeure on their contracted deliveries. In the U.S., the USD continues to recover from December's pounding as the recent string of economic data has raised hopes for a sustainable U.S. recovery. Today was no different with a much better-than-expected ADP Employment Change reading. The reading reported that 297,000 private payrolls were added during December, when an increase of 100,000 had been expected. In Canada, the CAD is slightly down but continues to trade around parity as good news in the U.S. means good news to the Canadian economy. With the sharp drop in commodity prices yesterday, don't expect the CAD to make much head way. December employment reports on Friday will provide the main focus this week, with job growth expected in both the U.S. and Canada.
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