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EUR/USD fell back below $1.23 after peaking $1.2390 on Friday

Monday, July 30, 2012 3:51 AM GMT

Good Morning ,

- Currencies traded in narrow ranges. EUR/USD fell back below $1.23 after peaking $1.2390 on Friday .   Risk on sentiment follows another press report on Friday suggesting Mario Draghi will meet with Bundesbank head Weidmann about the policy options available to the ECB .  Asian equity markets are in rally mode to start the week, tracking two consecutive sessions of outsized gains on Wall Street.

-Draghi  he meets with U.S. Treasury Secretary Timothy Geithner in Frankfurt today and is also attempting to win over Bundesbank President Jens Weidmann, a critic of ECB bond purchases .

- Draghi’s proposal involves Europe’s rescue fund buying government bonds on the primary market, buttressed by ECB purchases on the secondary market to ensure transmission of its record-low interest rates, two central bank officials said July 27 on condition of anonymity. Further ECB rate cuts and long- term loans to banks are also up for discussion, one of the officials said. While Draghi reaffirms ECB’s willingness to buy time, the central bank can’t solve the debt crisis alone, Moody’s Investors Service said today.

- Juncker confirmed that the temporary bailout fund, the European Financial Stability Facility, is working with the ECB on a plan to reduce borrowing costs, adding “we have no time to lose,” 

-  Article in Le Monde asserted that the ECB was gearing up to buy Spanish and Italian debt. European and ECB officials have not said a word to deny the reports, and later in the morning influential Germany Economic Adviser Bofinger stated that the ECB should purchase euro zone bonds to counter market disruptions. All together, these comments strongly suggest that Draghi is ready to deploy the big bazooka and put an end to surging bond yields .

- German Fin Min Schaeuble warned that EMU bailout funds are not likely to be used towards purchases of Spanish debt over the weekend, but that sentiment was overshadowed by comments from German Chancellor Merkel suggesting that nothing is off the table following talks with Italy PM Monti. EU's Juncker also indicated he is prepared to work with the ECB to help lower sovereign borrowing costs.

- German Economy Min Roesler: Still see significant doubts that Greece is measuring up to reform promises

- As many as 51% of Germans see domestic economy as better off outside EMU vs 29% who said it would be worse off

- Greece Finance Ministry: Troika inspectors to remain in Greece until a credible fiscal reform program is established; Govt leaders agree on most of the measures demanded by creditors

-  China Industrial Bank chief economist Lu Zhengwei: PBoC may further cut RRR in August to soften the decline in inflation; Inflation may fall to 1.7% from 2.2% .

-  Japan ,  June preliminary industrial production surprisingly registered a third consecutive m/m decline, prompting Ministry of Economy, Trade and Industry (METI) to downgrade its assessment of industrial output to "flat" from "in recovering trend".

-  In Australia, BHP is looking to postpone its decision on the expansion of A$30B Olympic Dam project by two years.Earlier this weekend, a BHP official said non essential spending may need to be reduced due to China slowdown that may be faster than expected. AUD came under slight pressure to start the week but found support at $1.0450.

 

10:30  GBP Mortgage Approvals

 10:30 GBP M4 Money Supply (MoM)

 10:30 GBP M4 Money Supply (YoY)

11:00  EUR Euro-Zone Business Climate Indicator

11:00  EUR Euro-Zone Consumer Confidence

 11:00 EUR Euro-Zone Economic Confidence

 11:00 EUR Euro-Zone Industrial Confidence

11:00  EUR Euro-Zone Services Confidence

 12:00 GBP CBI Reported Sales

 (CET)

Have a good day !

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