Thursday, August 30, 2012 - 06:53

Ldn FX: Hopes For ECB Bond-Buying Plan Continue To Support Euro

LONDON, Aug 30 (MNI) - Market continues its positive speculation that ECB President Mario Draghi will present a plan at next week's Sep. 6 policy meeting meeting to support eurozone peripheral debt with euro-dollar trading with a buoyant tone through European morning trade Thursday.

The bid tone was despite suggestions that end-month trade could produce euro supply at the fixes, as well as ideas that Fed's Bernanke may be poised to disappoint a market looking for hints for a near-term move toward QE3.

EURO SUMMARY: Opened early Europe at $1.2535 Euro-dollar closed in NY at $1.2530 after rate settled around this area through late afternoon trade following a late recovery rally to $1.2549. Rate had earlier been repulsed from $1.2565, trading to session lows of $1.2518. Rate initially edged to $1.2537 in early Asia before turning lower as rate reacted to the paring back of risk, led by sales of Aussie dollar. Rate touched a low of $1.2523 before meeting bid interest, talk in Asia of decent demand back in place around $1.2520, with rate then able to recover to around $1.2540. A dip to $1.2534 was quickly reversed as the rate got a boost from comments by China's Premier Wen that China is willing to invest in European bonds which provided rate with a bid tone into Europe. Rate pushed up to $1.2561 before move faltered, meeting US corp supply, with Dutch name supply in the mix as rate eased to $1.2538. Strong Swiss name demand emerged into the dip to take rate back to earlier highs, extending to $1.2564 as the Italian bond auction went well. Rate retains a buoyant tone ahead of NY.

GERMANY ECONMIN: Greece must stick to reform promises - Euro can become most stable global currency - Confirms view Greek exit from EMU manageable

EUROZONE: Data released in the Eurozone Thursday, * EMU DATA: Aug econ sent index down to 86.1; Jul unrevised 87.9 - Aug econ sentiment below MNI survey fcast median (88.0) - Aug business climate index -1.21, Jul unrev -1.27 - Aug consumer confidence down to -24.6, as expected - Aug industry confidence down to -15.3, below exp.(-14.8) - Aug services confidence down to -10.8 vs Jul -8.5 - Aug construction confidence down to -33.1 vs Jul -28.5 * GERMANY: Germany August sa unemployment +9k m/m; - MNI median forecast +8k for Aug unemployment * GERMANY: Jul ILO sa employed 41.620 mln; +23k m/m: stats office - Jul ILO sa unemployed 2.30 mln; -10k m/m: stats office - Jul ILO sa unemployment rate 5.5%; Jun 5.5% * GERMANY: Jul machine orders -2% y/y; Jun -1%; May -6%: VDMA - Jul domestic machine orders -18%; foreign orders +8% - May-Jul total orders +2%; domestic 0%; foreign +6% * ITALY: Aug sa business morale loses 4 pts to 78.5 -Mfg, construction and retail morale up slightly - Mfg orders weaker, outlook for demand up slightly, sales prices up - Mfg Inventories stable

YEN SUMMARY: Opened in early Europe at Y78.63 and Y98.70 Month-end demand in early Asia lifted dollar-yen to Y78.75, the move however was countered by sharp aussie-yen sales printing a low of Y81.14. The pair extended losses through the Tokyo fix to Y78.65 and settled in a tight range. Weaker-than-expected Japanese retail trade data had little market reaction and dollar ground to Y78.60 in late dealings. Euro-yen largely mirrored dollar moves, tied to a narrow Y98.52 - Y98.71 range. Dollar-yen endured a painful session in Europe with trade stuck in a Y78.60-66 range. Bids seen on the downside at Y78.50, stronger behind at Y78.30/25. Tech resistance at Y78.71 from the 21 dma, ahead of offers at Y78.75/80, through here and expect strong resistance from exporters for month end. The cross ground lower on the open amid light flow to Y98.61, before demand cushioned the move to settle in a tight range. The pair lifted to session highs Y98.78 on market rumours of a well-received Italian auction, later settling around Y98.70 on release of full size allotment.

JAPAN: Data released in Japan Thursday, * Capital flows for the week ended Aug. 25 - MOF * Japanese investors: Sold net Y49.6 bln in foreign equities - Bought net Y1.05 trln in foreign bonds - Bought net Y21.7 bln in foreign money market instruments - Resulting in a net buying of Y1.02 trln. * Foreign investors: Sold net Y135.0 bln in Japanese equities - Bought net Y215.4 bln in Japanese bonds - Sold net Y2.02 trln in Japanese money market instruments - Resulting in a net selling of Y1.94 trln. * Japan Aug 1st 10-day exports unchanged y/y vs. July -8.1% - Japan Aug 1st 10-day imports -6.4% y/y vs. July +2.1% - Japan Aug 1st 10-day trade deficit Y216.28 billion, shrinking by 39.4% from a deficit of Y356.92 billion a year earlier * July Retail Sales -0.8% Y/Y; MNI Median Fcast -0.3% - July Retail Sales Post 1st Y/Y Drop in 8 Months - July Retail Car Sales 32.5% Y/Y; June +37.2% - July Retail Fuel Sales -7.0% Y/Y; June -6.1% - July Retail Machinery Sales -26.6% Y/Y; June -32.4%

CHINA: - CHINA WEN: China willing to invest in European bond market - Hope Europe can balance fiscal reform, econ growth

OTHER ASIA: * AUSTRALIA: From the ABS Q2 new capex and expected capex report: - 3rd estimate of expected capex for 2012-13 year is A$181.5 bln compared with A$172.9 bln in estimate 2. - Q2 total new capex +3.4% q/q - MNI median forecast +2.5% q/q - Forecasts ranged from +1% to +11.5%. - July building approvals -17.3% m/m - MNI median forecast -5.0% m/m - Forecasts ranged from -17% to +5%. * NEW ZEALAND: From the NBNZ: - Aug biz confidence +19.5 vs Jly +15.1 - Aug activity outlook +26.4 vs Jly +24.0

BRAZIL: The Central Bank's Monetary Policy Committee (Copom) cut the benchmark Selic 50 basis points to 7.50% as expected Wednesday, but signaled the easing cycle is near the end, saying any future cuts would be conducted with "maximum restraint" altering language from recent statements. The latest rate cut brings this easing cycle, begun August 2011, to 500 basis points, and it is the third straight half-point cut.

M&A REPORTS: ING Group is reportedly selling it's Canada unit to Scotiabank for around $3.1 billion in cash, although traders note the deal will not complete until the end of the year and so warn against expecting any quick market impact from the deal.

LOOKING AHEAD: * US data sees August Store Sales, although the main releases start at 1230GMT with the weekly jobless claims and also personal income data. * The level of initial jobless claims is expected to fall 1,000 to 371,000 in the August 25 week after very small increases in the previous two weeks. * Personal income is expected to rise 0.3% in July, as private payrolls jumped 172,000, hourly earnings rose 0.1%, and the average workweek held steady at 34.5 hours. PCE is forecast to rise 0.4%, as retail sales rose 0.8% both including and excluding motor vehicle and parts sales. The core price index is expected to rise only 0.1%. * Weekly EIA Natural Gas Storage data is due at 1430GMT, followed at 1500GMT by the Kansas City Fed Production data for August. * Back in Europe at 1800GMT, ECB Executive Board member Joerg Asmussen is due to give a speech at the SPD Economics Forum, in Potsdam. * The US also conducts a 7-year note auction Thursday, while late data sees the weekly M2 Money Supply data at 2030GMT.

--John Webb London bureau (44 207) 862 7497


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