EUR/USD
The European Central Bank may announce a range of measures tomorrow to stimulate bank lending, said three euro-area officials with knowledge of policy makers’deliberations.Options on the table include loosening collateral criteria so that institutions have more access to cheap ECB cash and offering them longer-term loans to grease the flow of credit to the economy, said the officials, who spoke on condition of anonymity because the discussions are private. Two said an interest rate cut is likely, with only the size of the reduction to be determined for the monthly decision tomorrow. The ECB is focusing on getting banks lending again rather than increasing its government bond purchases to fight Europe’s debt crisis. The central bank’s insistence that governments take measures to restore investor confidence appears to have paid dividends, with Italian and Spanish yields plunging after Germany and France agreed to move the 17-nation euro area toward a fiscal union, a stance they reiterated today.“The ECB’s role tomorrow is going to be pretty much about the banks, and after tomorrow the liquidity side should be on a much stronger footing,” said Silvio Peruzzo, an economist at Royal Bank of Scotland Group Plc in London. “The division of labor is very clear -- the ECB takes care of the banks, and the sovereigns take care of the fiscal side.”
GBP/USD
U.K. stocks retreated, sending the FTSE 100 Index lower for the first time in four days, as investors await the outcome of this week’s European Union summit in Brussels. Man Group Plc dropped 2.4 percent after reporting a decline in the net asset value at its flagship fund. ICAP Plc lost 4.4 percent as Morgan Stanley downgraded the shares. International Consolidated Airlines Group SA slid amid a report pilots at its Iberia unit plan to strike work. The FTSE 100 declined 21.81, or 0.4 percent, to 5,546.91 at the close in London, after earlier rallying as much as 1.1 percent. The FTSE All-Share Index also slipped 0.4 percent today, while Ireland’s ISEQ Index rose 0.6 percent. “The overall picture remains the same,” said Ben Critchley, a sales trader at IG Index. “Until a genuinely convincing message can be put forward that will actually draw a line under the sovereign-debt woes, traders are right to remain cautious as we approach the year end.” Stocks initially rallied on speculation euro-area policy makers will agree to a bigger bailout effort for the region’s most-indebted countries at the summit. The Financial Times reported policy makers may run the temporary bailout fund and a proposed permanent facility simultaneously. Germany today rejected any such proposal as Chancellor Angela Merkel’s government expressed pessimism over the outcome of the summit that begins today.
USD/JPY
NEC Corp. and Credit Saison Co. Joined Japanese borrowers choosing loans over bond sales as bank rates fell below note yields for the longest period since the collapse of Lehman Brothers Holdings Inc. Interest rates for new loans averaged 1.194 percent in October, Bank of Japan’s most recent figures show, while corporate bonds yielded 1.34 percent, according to a Nomura Securities Co. debt index. That marked the sixth month bond yields exceeded loan rates, the longest stretch since the 10 months ended July 2009. U.S. company bonds are yielding 4.01 percent as of Dec. 6, according to Bank of America Merrill Lynch’s U.S. Corporate Master Index, meaning that yields also exceed bank rates. Japanese banks usually charge more for loans than bond yields, and the reversal reflects companies’ lack of demand for funds due to their ample cash holdings and concern the European debt crisis will hit their businesses, said Takeshi Shibasaki,chief strategist at Mizuho Securities Co. in Tokyo. Loans rates were higher than bond yields for at least six years through 2005, according to Bloomberg data. “It’s hard to say that financial markets are operating smoothly,” Shibasaki said. “The increase in lending rates has been relatively limited because Japanese banks aren’t having trouble raising funds, but there was a big widening in corporate bond spreads.”Electronics maker NEC, consumer lender Credit Saison and golf course operator Accordia Golf Co. have all switched to loans from bond issuance since October.
USD/CAD
Canada’s dollar declined from the strongest level in a month as renewed concern Europe’s sovereign debt crisis will worsen spurred an increase in risk aversion among investors. Canada’s currency has been the fourth-best performer after the U.S. dollar, yen and pound over the past three months against the euro among the most-traded currencies, gaining 2.4 percent, as investors sought refuge from the prospect of a global recession. The European Central Bank may announce a range of measures tomorrow to stimulate bank lending, according to three euro-area officials. “We had a big move yesterday, but there is a more cautious tone in the market overall and the risk backdrop is leaning against the Canadian dollar,” said David Watt, senior currency strategist at Royal Bank of Canada’s RBC Capital Markets unit in Toronto. Investors are “waiting to see what comes out of the European summit tomorrow to give the market direction.”Canada’s currency rose as much as 0.3 percent to C$1.0066 per U.S. dollar, the strongest since Nov. 3, before trading little changed at C$1.0099 at 5:15 p.m. in Toronto. One Canadian dollar buys 99.07 U.S. cents.
The European Central Bank may announce a range of measures tomorrow to stimulate bank lending, said three euro-area officials with knowledge of policy makers’deliberations.Options on the table include loosening collateral criteria so that institutions have more access to cheap ECB cash and offering them longer-term loans to grease the flow of credit to the economy, said the officials, who spoke on condition of anonymity because the discussions are private. Two said an interest rate cut is likely, with only the size of the reduction to be determined for the monthly decision tomorrow. The ECB is focusing on getting banks lending again rather than increasing its government bond purchases to fight Europe’s debt crisis. The central bank’s insistence that governments take measures to restore investor confidence appears to have paid dividends, with Italian and Spanish yields plunging after Germany and France agreed to move the 17-nation euro area toward a fiscal union, a stance they reiterated today.“The ECB’s role tomorrow is going to be pretty much about the banks, and after tomorrow the liquidity side should be on a much stronger footing,” said Silvio Peruzzo, an economist at Royal Bank of Scotland Group Plc in London. “The division of labor is very clear -- the ECB takes care of the banks, and the sovereigns take care of the fiscal side.”
GBP/USD
U.K. stocks retreated, sending the FTSE 100 Index lower for the first time in four days, as investors await the outcome of this week’s European Union summit in Brussels. Man Group Plc dropped 2.4 percent after reporting a decline in the net asset value at its flagship fund. ICAP Plc lost 4.4 percent as Morgan Stanley downgraded the shares. International Consolidated Airlines Group SA slid amid a report pilots at its Iberia unit plan to strike work. The FTSE 100 declined 21.81, or 0.4 percent, to 5,546.91 at the close in London, after earlier rallying as much as 1.1 percent. The FTSE All-Share Index also slipped 0.4 percent today, while Ireland’s ISEQ Index rose 0.6 percent. “The overall picture remains the same,” said Ben Critchley, a sales trader at IG Index. “Until a genuinely convincing message can be put forward that will actually draw a line under the sovereign-debt woes, traders are right to remain cautious as we approach the year end.” Stocks initially rallied on speculation euro-area policy makers will agree to a bigger bailout effort for the region’s most-indebted countries at the summit. The Financial Times reported policy makers may run the temporary bailout fund and a proposed permanent facility simultaneously. Germany today rejected any such proposal as Chancellor Angela Merkel’s government expressed pessimism over the outcome of the summit that begins today.
USD/JPY
NEC Corp. and Credit Saison Co. Joined Japanese borrowers choosing loans over bond sales as bank rates fell below note yields for the longest period since the collapse of Lehman Brothers Holdings Inc. Interest rates for new loans averaged 1.194 percent in October, Bank of Japan’s most recent figures show, while corporate bonds yielded 1.34 percent, according to a Nomura Securities Co. debt index. That marked the sixth month bond yields exceeded loan rates, the longest stretch since the 10 months ended July 2009. U.S. company bonds are yielding 4.01 percent as of Dec. 6, according to Bank of America Merrill Lynch’s U.S. Corporate Master Index, meaning that yields also exceed bank rates. Japanese banks usually charge more for loans than bond yields, and the reversal reflects companies’ lack of demand for funds due to their ample cash holdings and concern the European debt crisis will hit their businesses, said Takeshi Shibasaki,chief strategist at Mizuho Securities Co. in Tokyo. Loans rates were higher than bond yields for at least six years through 2005, according to Bloomberg data. “It’s hard to say that financial markets are operating smoothly,” Shibasaki said. “The increase in lending rates has been relatively limited because Japanese banks aren’t having trouble raising funds, but there was a big widening in corporate bond spreads.”Electronics maker NEC, consumer lender Credit Saison and golf course operator Accordia Golf Co. have all switched to loans from bond issuance since October.
USD/CAD
Canada’s dollar declined from the strongest level in a month as renewed concern Europe’s sovereign debt crisis will worsen spurred an increase in risk aversion among investors. Canada’s currency has been the fourth-best performer after the U.S. dollar, yen and pound over the past three months against the euro among the most-traded currencies, gaining 2.4 percent, as investors sought refuge from the prospect of a global recession. The European Central Bank may announce a range of measures tomorrow to stimulate bank lending, according to three euro-area officials. “We had a big move yesterday, but there is a more cautious tone in the market overall and the risk backdrop is leaning against the Canadian dollar,” said David Watt, senior currency strategist at Royal Bank of Canada’s RBC Capital Markets unit in Toronto. Investors are “waiting to see what comes out of the European summit tomorrow to give the market direction.”Canada’s currency rose as much as 0.3 percent to C$1.0066 per U.S. dollar, the strongest since Nov. 3, before trading little changed at C$1.0099 at 5:15 p.m. in Toronto. One Canadian dollar buys 99.07 U.S. cents.