Euro Sold on Debt Crisis Jitters, Fed Beige Book May Offer Lifeline

DailyFX

The Euro fell against the US Dollar amid a pickup in sovereign risk jitters but some support may emerge if the Fed’s Beige Book buoys hopes of firming US growth.

Talking Points

  • Euro Sold Amid Sovereign Risk Jitters as Spanish CDS Spreads Rise
  • Rajoy / Hollande Meeting Sought for Clues on Spain Bailout Request
  • Fed Beige Book May Boost Sentiment, Costco Q3 Earnings on Tap

Sovereign risk jitters are on the rise in early European trade, with a pickup in Spanish CDS spreads pushing higher and weighing on the Euro against most of its leading counterparts. The worried mood precedes a meeting between Spanish Prime Minister Mariano Rajoy and French President Francois Hollande amid continued speculation about the likelihood and timing for a full-on EU bailout request from Madrid. While the sit-down is unlikely to yield a concrete resolution on this front, investors are keeping a close eye on any remarks that shape expectations going forward.

In the background, an EU Parliament panel and the EU Economic and Monetary Affairs Committee are scheduled to hold parallel debates on Eurozone crisis resolution as banking union proposals. Here too, a clearly defined set of policy announcements is probably too much to ask for, but traders still monitor the proceedings for any particularly telling commentary. On the issuance front, Italy is due to sell €11 billion in 3- and 6-month bills. A pickup in average yields or particularly low bid-to-cover ratios may compound downward pressure on the single currency.

Later in the day, the spotlight turns to the Federal Reserve Beige Book survey of regional economic conditions. Traders continue look toward performance in the US hoping a pickup in the recovery will help offset headwinds facing global output from a recession in Europe and a slowdown in China. Signs of improvement in line with the recent pickup in US economic data may prove supportive for risk appetite, punishing the safe-haven US Dollar. On the earnings docket, Costco Wholesale Corp is due to release third-quarter results. Investors will look to the bulk retailer’s guidance for a reading on consumption trends.

Asia Session: What Happened

GMT

CCY

EVENT

ACT

EXP

PREV

23:30

AUD

Westpac Consumer Confidence (OCT)

1.0%

-

1.6%

23:30

AUD

Westpac Consumer Confidence Index (OCT)

99.2

-

98.2

6:00

JPY

Machine Tool Orders (YoY) (SEP P)

-3.0%

-

-2.7%

Euro Session: What to Expect

GMT

CCY

EVENT

EXP/ACT

PREV

IMPACT

6:00

EUR

German Wholesale Price Index (MoM) (SEP)

1.3% (A)

1.1%

Low

6:00

EUR

German Wholesale Price Index (YoY) (SEP)

4.2% (A)

3.1%

Low

6:45

EUR

French Manufacturing Production (MoM) (AUG)

-0.7%

0.9%

Low

6:45

EUR

French Manufacturing Production (YoY) (AUG)

-4.0%

-2.8%

Low

6:45

EUR

French Industrial Production (MoM) (AUG)

-0.3%

0.2%

Medium

6:45

EUR

French Industrial Production (YoY) (AUG)

-4.2%

-3.1%

Medium

8:00

EUR

Italian Industrial Production nsa (YoY) (AUG)

-

-4.4%

Low

8:00

EUR

Italian Industrial Production wda (YoY) (AUG)

-9.7%

-7.3%

Medium

8:00

EUR

Italian Industrial Production sa (MoM) (AUG)

-0.5%

-0.2%

Medium

9:00

EUR

Italy to Sell €11B in 3- and 12-mo Bills

-

-

Medium

Critical Levels

CCY

SUPPORT

RESISTANCE

EURUSD

1.2780

1.2964

GBPUSD

1.5971

1.6040

--- Written by Ilya Spivak, Currency Strategist for Dailyfx.com

To contact Ilya, e-mail ispivak@dailyfx.com. Follow Ilya on Twitter at @IlyaSpivak

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