EU Morning Report – EFSF and ESM to coexist

The euro produced gains against its major counterparts as negotiations over the Greek debt haircut appear tough, yet constructive and far away from collapse. Newswires on Monday were dominated by the eurozone Finance Ministers meeting, which covered a wide array of issues, besides the progress of Greek deal talks. Most importantly, there were discussions on the prospect of combining the European Financial Stability Facility (EFSF) and its successor, the European Stability Mechanism (ESM), lending capacities. German Chancellor Merkel’s, reported, stance is that the two funds combined lending capacity cannot exceed EUR 500 billion. Nevertheless, this may change as discussions progress and participants, including IMF, consider such a prospect promising. Versus the US dollar, the single currency advanced to 1.3024 from 1.2882. Against the Swiss franc, the euro rose to 1.2071 from 1.2039.

The US dollar depreciated against a basket of currencies on a poor financial calendar day for the US and a Chinese bank holiday. Today, market participants will likely turn their focus on tomorrow’s FOMC decision. Federal fund rate always dominate trading, however this one is special, being the first time the new rate forecasts are due to be released for the first time. Additionally, Federal Bank Chairman Bernanke’s press conference will be closely monitored, as it could provide hints on the possibility of additional quantitative easing, and even inflation targeting.

The Australian dollar jumped to 1.0526 from 1.0489 versus the US dollar. The British pound rose to 1.5577 from 1.5551 against the US dollar.

Oil prices surged to 99.55 dollars a barrel from 97.86. Gold rose to 1679.07 dollars an ounce from 1671.20. Silver advanced to 32.4355 dollars an ounce from 32.3150.

1 data generated by Trading Central™, 2 data obtained from easy-forex Inside Viewer™

Calendar

CurrencyTime (GMT)EventForecast

JPY03:30Rate Decision for January0.1%EUR10:00Industrial Orders m/m for November-2.2%CAD13:30Retail Sales m/m for November0.2%

3 at the time of writing

Labels: EFSF, ESM, eu morning report, european stability facility, european stability mechanism