Euro Remains Soft Ahead of French Bond Auction

Euro remains soft after overnight's selloff, with EUR/USD pressing 1.29, EUR/JPY below 100 while EUR/AUD is hovering around record low. Focus will first turn to France's bond auction today. France plans to sell up to EUR 8b in debt today, including securities that mature in 2021, 2023, 2035 and 2041. Markets are still waiting for actions from rating agencies after S&P placed 15 eurozone nations on review in December while Fitch cut France's rating outlook. Euro has been weak since yesterday's lackluster and today's result, if uninspiring, would possibly trigger deeper selloff.

Economic data would remain the a major focus too. This week's risk rally has been triggered by a string of solid manufacturing data. and investors will look into UK PMI services, US ISM non-manufacturing index and Canadian Ivey PMI today. In addition, attention will be on employment data from US where ADP employment, Challenger job cuts and initial jobless claims will be featured. Any upside surprises there would provide support to stocks and commodity currencies. Other data to be watched include Eurozone industrial new orders, and Canadian IPPI and RMPI.

Released earlier, Australia's trade surplus unexpectedly shrank to AUD 1.38b in November. Both mining export volume and value, including lump iron ore, hard-coking coal, eased over the month due to decreased demand from China. Meanwhile, imports of capital goods increased. The resources boom boosts imports of capital goods as domestic production is insufficient to meet demand of miners.

PBoC suspended three month bills auction for another week today as short-term lending rates jumped ahead of Chinese new year. That surge in demand for funding offset PBoC's cash injection to the markets. Liquidity condition in China is expected to remain tight for a while. Though, it's widely speculated that PBoC would lower the bank reserve ratio again once, or even twice later this month.