NY Session: EUR Lower in Choppy Trading Despite ECB Lending

Trading was choppy with risk sentiment moving sharply lower at the start of the NY session after the knee-jerk rally that followed the ECB’s lending facility proved unsustainable. Despite the bank lending 489B euros to 523 banks, sentiment remained on shaky ground as it is uncertain how the banks will use the funds. Moreover, the operation does not address the underlying structural issues of excessive budget deficits and deteriorating growth in European sovereigns. The EUR traded lower against most of the G10 with EUR/USD tumbling from session highs of nearly 1.32 to current levels of around 1.3045. Euro zone consumer confidence also weighed on the common currency as it declined by more than forecast to -21.2 for the preliminary December reading. This was down from the prior -20.4 and lower than the market expectations of -21.0.

In the U.S., existing home sales rose by 4.0% m/m in Nov. to 4.42M from a downward revised 4.25M in the prior month. The data showed growth in the housing market following the strong Nov. housing starts and building permits figures released yesterday.

Canada retail sales for Oct. were higher than anticipated giving a boost to the Loonie. Headline retail sales grew by 1.0% m/m (cons. 0.5%) and 0.7% less autos (cons. 0.2%). Coupled with the surge in oil prices today, the CAD gained against all of its major counterparts with EUR/CAD currently trading below a long term horizontal support level that comes in around the 1.34 figure.

Swiss government officials were on the wires today with the Economy Minister Schneider-Ammann saying that the franc is “massively overvalued” noting that PPP is at 1.35-1.40 versus the euro. Finance Minister Widmer-Schlumpf said that the strong franc poses problems for the economy. The rhetoric sent the CHF lower with EUR/CHF advancing to session highs of around 1.2240 and USD/CHF climbing to nearly 0.9400.

The U.S. EIA said that US crude oil inventories fell by 10.6M barrels last week. This was nearly 5 times more than the forecast decline of -2.1M barrels and the largest weekly drop in over a decade. WTI crude rallied on the news and is currently up by about +1.57%. Precious metals were lower with gold and silver currently down by -0.03% and -0.54% respectively.

U.S. equities clawed their way back into positive territory to close the session after deep declines with the DJIA closing up by about +0.03% while the S&P 500 rose by +0.19%.

New Zealand 3Q GDP is due out shortly and expected to show growth accelerating to 0.6% q/q (prior 0.1%) and 2.2% y/y (prior 1.5%). Later tonight, the Bank of Japan releases its monthly economic report; weekly securities transactions figures and November supermarket sales are also due.