Markets
US markets are closed for President’s Day, resulting in a very low volume trading session. The EMU eco calendar only contained second tier eco data, resulting in sentiment-driven trading. Negative underlying core bond sentiment caused a small sell-off in Bunds with the curve bear steepening. German yields increase by 0.3 bps (2-yr) to 4.3 bps (30-yr). On intra EMU-bond markets, 10-yr yield spread changes versus Germany increase by 3 bps for Spain and Italy. Spain announced the launch of a new 30-yr benchmark, likely tomorrow. Italian BTP’s lose some ground as media report about cracks in the centre-right coalition. Greece outperforms (-6 bps) after Fitch upgraded the country’s rating from B- to B (positive outlook).
The dollar entered calmer waters today. Traded volumes were subdued with US markets closed. Even so, USD selling already eased at the end of last week and the US currency stayed off the recent lows today. There were only second tier eco data in Europe. European risk sentiment turned less positive than last week. In line with the recent market dynamics, this was slightly supportive for the dollar, even for USD/JPY. EUR/USD trades in the 1.2380 area. USD/JPY is changing hands around 106.75. There is no sign of a sustained USD rebound yet. That said, there was also no additional damage for the dollar. Looking at where we were on Friday morning, this might be a minor relief for USD bulls.
Sterling traded with a slightly negative bias today, both against the dollar and the euro. Trading was mostly technically in nature. There were no important UK eco data except for the Rightmove house prices published overnight. EUR/GBP trades in the 0.8860 area. Cable dropped back below the 1.40 handle. Markets are looking forward to the CBI order data tomorrow and, even more, UK wage data scheduled for release on Wednesday.
News Headlines
"Signs are mounting that the German economy is increasingly confronted with bottlenecks with regard to highly skilled staff, which could become an obstacle for an even stronger expansion," the Bundesbank says in its monthly report.
IHS Markit said its UK Household Finance Index, a monthly gauge of financial well-being, fell to a seven-month low of 42.2 from 42.9 in January. British households became more pessimistic about their finances this month. Most now expect borrowing costs to rise again within six months after the Bank of England raised interest rates in November, a survey showed on Monday.
The European Monetary Fund being planned to replace the euro zone bailout fund should be an intergovernmental body controlled by EMU member states and independent of the EC, the Fund’s head Klaus Regling said. The Commission wants the ESM to become an EU institution governed by a separate treaty signed by EMU countries.
German Chancellor Merkel put forward her close ally Annegret Kramp-Karrenbauer, premier of the state of Saarland, to take over as secretary general of her Christian Democratic Union (CDU), party sources said.
Irish Finance Minister Donohoe said Irish central bank governor Philip Lane’s name will be withdrawn for the vice presidency of the ECB. Donohoe said he’ll support Spanish Economy Minister Luis de Guindos
