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12.01.2011 12:58

EU session review: Euro falls versus Franc as Portuguese bonds decline following debt auction

Data released
09:30     UK     Trade in goods (November), bln    -8.7    -8.3    -8.6 (-8.5)
09:30     UK     Non-EU trade (November), bln    -5.0    -4.9    -5.1 (-5.0)
10:00     EU(16)     Industrial production (November)    1.2%    0.6%    0.7%
10:00     EU(16)     Industrial production (November) Y/Y     7.4%    5.9%    7.1 (6.9)%

The euro fell against the Swiss franc, snapping a two-day gain, amid speculation today’s sale of Portuguese government bonds won’t be sufficient to prevent the region’s debt crisis from deepening.
The European currency erased an advance versus the dollar and Portuguese 10-year debt declined after the bond sale, at which borrowing costs fell and demand increased. Spain and Italy are scheduled to hold auctions tomorrow.
“It was a very healthy auction but the euro is falling,” said Simon Derrick, chief currency strategist at Bank of New York Mellon Corp. “If there is a flurry of concern about Spain you could see the euro have another turn to the downside but I like the fact that they have proved more effective at crisis management.”
The yield on the 10-year Portuguese bond was eight basis points higher at 7.09 percent.
European governments are considering aid for Portugal, debt buybacks, lower interest rates on rescue loans and guarantees against excessive debt as part of a package to quell the financial crisis, according to two people with direct knowledge of the talks.
The plan, which may include a loan to Portugal of about 60 billion euros ($78 billion) and purchases of outstanding Greek debt, would mark an attempt to contain the crisis that has frustrated unprecedented efforts by policy makers to calm markets and raised questions about the health of the 17-nation euro economy.
Euro-area finance ministers will discuss elements of the package next week.
Portugal today raised 599 million euros in the sale of 10- year bonds at an average yield of 6.72 percent, down from a yield of 6.81 percent at a sale on Nov. 10. Portugal also sold 650 million euros of notes due in 2014 at 5.40 percent.
Some EU leaders have suggested the EU’s fund could be used to buy government bonds or to offer shorter-term credits.

EUR/USD printed highs on $1.3047 ahead of the auction before it fell to $1.2970 lows and re,ains under pressure.

GBP/USD tested highs on $1.5680, but failed to hold above, retreating to $1.5600.

USD/JPY challenged Y83.00 before recovered to Y83.37.

US data starts at 1200GMT with the weekly MBA Mortgage  Application Index. This is followed at 1330GMT with the December  Import/Export Price Index data.
The weekly EIA Crude Oil Stocks data is then due, at 1530GMT.

12.01.2011 12:36

GBP/USD recovers from lows

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