Pre-New York Open: Risk-Off Supports Safe Havens

• USD firmer today as market sentiment shifts to risk off on bank capital concerns and speculation that Spain is considering seeking EU, IMF loans. Equity markets are lower in Europe with the Euro Stoxx 50 currently down about -1.47% while the DAX is lower by around -0.86%. U.S. stock futures are hinting at a negative open, UST yields are lower across the curve and the Dollar Index has advanced to test its daily Tenkan line around the 80.15/20 level. On the data front, Nov. factory orders are due at 1000ET and expected to show a 2.0% increase from the prior -0.4%.

• EUR weaker across the board after softer than expected Dec. services PMI in Germany (52.4 vs. exp 52.7) and a German bund auction. Euro zone composite and services PMI for Dec. printed in contractionary territory and EZ inflation slowed to 2.8% in Dec. as expected from the prior 3.0%. Rumors that Spain is considering seeking EU, IMF loans weighed on the euro and were later denied. EU’s Juncker said that Europe is on the brink of a recession of unknown scope. EUR is weakest against the safe havens USD and JPY amid risk aversion. EUR/USD was rejected from the 21-day SMA and has moved back below the pivotal 1.30 big figure – currently trading around 1.2935.

• GBP mostly firmer against the G10 currencies except against the USD and JPY following better then consensus construction PMI in Dec. (53.2 vs. exp 51.5), higher than forecast mortgage approvals in Nov. (52.9K vs. exp 52.5K) and better than expected consumer credit figures for Nov. The pound is strongest against the CHF and EUR with EUR/GBP taking out the reported 0.8300 barrier option.

• JPY bid across the board as risk off sentiment is driving traders to seek safety. The JPY is below the 100.00 figure against the EUR – at nearly 11 year lows. PM Noda said that he wants to cooperate more with the BoJ to beat deflation which raises the risk of intervention.

• CAD trading mixed – firmer against the high beta currencies and weaker against the safe havens. The traditional drivers equities and oil are both lower at time of writing which may weigh on the Loonie. There is no significant economic data due out of Canada today. USD/CAD is currently testing the 100-day SMA which comes in around the 1.0135/40 level and may be pivotal on a daily closing basis.