Dollar pared some gains and lost momentum after Fitch Ratings warned that US banks are facing serious contagion risks from further deterioration of European debt crisis. But the greenback remains supported by generally weak sentiments. Fitch noted that "unless the euro zone debt crisis is resolved in a timely and orderly manner, the broad credit outlook for the U.S. banking industry could worsen." The six largest US banks had around $50b in net exposure to the five most troubled countries in Greece, Ireland, Portugal, Italy and Spain, including deposits, loans outstanding and securities. And, even if the risks are hedged with CDS, the CDS will not be triggered in case of voluntary losses like what Greece plan to do in the second bailout.
Moody's Investors Service downgraded 10 German Landebanks, a network of state-controlled lenders, and warned that "future government support for German public-sector banks has become less certain, partly owing to the new bank resolution regime that enables the government to impose losses on creditors outside of liquidation." One was downgraded by one notch, two by two notches and the other seven by three notches. Initial focus in European session will be on markets' reaction to the banking news.
Also, eyes will be on France and Spain's combined EUR 12.2b bond auctions today. France will sell as much as EUR 8.2b of bonds today, including EUR 7b of notes due in Sep 2013, Jul 1015, Feb 2016 and July 016, as well as EUR 1.2b of inflation linked debt maturing Jul 2016 and Jul 2022. Spain will sell up to EUR 4b of 10 year benchmark bonds today.
On the data front, New Zealand PPI inputs rose 0.6% qoq in Q3, inline with expectation by PPI outputs rose much less than consensus by 0.2% qoq. UK data will be a main focus again with retail sales featured, along with Swiss ZEW in European session. In US session, Canadian international securities transactions, US new residential construction, jobless claims and Philly Fed survey will be released. Also, New York Fed Dudley is scheduled to speak and would probably express his support for further Fed easing again.
Moody's Investors Service downgraded 10 German Landebanks, a network of state-controlled lenders, and warned that "future government support for German public-sector banks has become less certain, partly owing to the new bank resolution regime that enables the government to impose losses on creditors outside of liquidation." One was downgraded by one notch, two by two notches and the other seven by three notches. Initial focus in European session will be on markets' reaction to the banking news.
Also, eyes will be on France and Spain's combined EUR 12.2b bond auctions today. France will sell as much as EUR 8.2b of bonds today, including EUR 7b of notes due in Sep 2013, Jul 1015, Feb 2016 and July 016, as well as EUR 1.2b of inflation linked debt maturing Jul 2016 and Jul 2022. Spain will sell up to EUR 4b of 10 year benchmark bonds today.
On the data front, New Zealand PPI inputs rose 0.6% qoq in Q3, inline with expectation by PPI outputs rose much less than consensus by 0.2% qoq. UK data will be a main focus again with retail sales featured, along with Swiss ZEW in European session. In US session, Canadian international securities transactions, US new residential construction, jobless claims and Philly Fed survey will be released. Also, New York Fed Dudley is scheduled to speak and would probably express his support for further Fed easing again.