The Euroresumed a steady incline overnight after a series of down-days, with comments from IMF Managing Direction Christine Lagarde providing moderate support across the risk spectrum. The prospect of Greece receiving more leeway to reduce their budget deficit inspired a relief rally of sorts, with the Euro the prime beneficiary. Largarde noted in a press conference “It is sometimes better, given the circumstances to have a bit more time.” This is what we advocated for Portugal, it’s what we advocated for Spain, and it’s what we’re advocating for Greece, where I have said repeatedly that an additional two years was necessary for the country to actually face the fiscal consolidation program that is considered.”
The Europared losses seen earlier this week with a break to the upside of $US1.29 before running out of steam at highs just above $US1.2950. After a brief period of weakness on the back of yesterday’s S&P downgrade of Spain, the ‘bad news is good news’ factor also prompted a reversal, considering the downgrade places more pressure on Spain to come to the bailout party, and make a formal request for aid. Standard & Poor’s downgraded Spanish debt to one notch above ‘junk’ status from BBB+ to BBB- and placed Spain on negative watch, citing “mounting risks to Spain’s public finances, due to rising economic and political pressures.”
Its clear investors are hoping Spain’s budget reforms and bank stress test report released recently will pave the way for a formal request for financial aid, both of these a considered critical housekeeping before financial assistance will be requested. Last week Prime Minister Mariano Rajoy rejected reports a bailout is imminent, while Deputy Economy Minister Fernando Jimenez Latorre has said “we are analysing the options.” Economy Minister Luis de Guindos took it a step further on Thursday stating Spain “doesn’t need a bailout at all.”
The latest US weekly jobless claims provided some solace for investors with the number of US citizens applying for benefits falling to 339,000 for the week ending the 6th of October, significantly below expectations of 370,000. Overall, it was a risk-neutral evening for US markets despite the jobless claims falling to 4-year low. The DOW & S&P500 finished -0.14 and +0.02 percent respectively.
The AUDUSDpair also maintained a slow grind higher supported by yesterday’s local jobs data which showed the economy created 14,500 new jobs in September, outstripping expectations of 5,000 new jobs. Nevertheless, a rise in the official unemployment rate moderated the upside with the jobless rate climbing to 5.4 percent from 5.1 percent in August. Economist had expected a rise to 5.3 percent. With little in the way of scheduled releases we anticipate a fairly quiet day with regional equities likely to remain the key directive. The Aussie dollar is currently buying 102.6 US cents.
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