There have been very few developments over the past several hours and since the New York close, with market mostly locked in some quiet trade. The US Dollar remains very well bid, and any minor Greenback selling on the day thus far should not be interpreted as anything more than short-term profit taking and a temporary consolidation. We continue to recommend keeping a close watch on the ever widening Eurozone bond yields, with Italian yields above 7% and considering an assault on an alarming 8%, while Spanish yields remain under pressure following another weak auction.
This would most definitely result in some form of an official, and potential coordinated response in an effort to mitigate any resulting damage to the banking system. Already, there has been an escalation in concern over the European banking system and its ability to manage through the crisis, and we have even been hearing rumors of official action on Thursday. This theme will be a critical one over the coming weeks and could expose the Euro currency to more weakness. Rating agencies are also watching closely, and any talk of downgrades will only make matters worse for local and global risk appetite.
Elsewhere, the economic calendar has been equally light on Thursday, with the only key releases thus far coming from higher Aussie average weekly wages, softer UK Nationwide consumer confidence, offsetting UK retail sales, weaker Eurozone construction output and a further deterioration in Swiss ZEW. The solid UK retail sales data has however helped to prop the currency intraday, with Sterling relatively outperforming across the board. Looking ahead, things pick up in North America with building and housing permits, initial jobless claims and the Philly Fed. On the official circuit, Germany’s Merkel, Fed Pianalto, Fed Dudley, EU Barroso and EU Almunia are all slated to speak. US equity futures are slightly higher ahead of North America, while commodities track marginally lower.