Forex Exchange Morning Report (12/06/2012)

USDINR- WILL OPEN UP OR FLAT

EURINR- WILL OPEN DOWN

GBPINR- NOT CLEAR ON CHARTS

JPYINR- NOT CLEAR ON CHARTS 

Forex Exchange Morning Report

Market wrap

The immediate market euphoria after Spain's weekend bailout announcement gave way last night to scepticism. Details of the rescue process, which will not be announced until the EC has fully assessed Spain's banking sector, could impact the state of government finances as well as the security ranking of existing bondholders. The related news fl ow was also negative: Fitch downgraded two of Spain's largest banks, the deputy governor of the central bank resigned, and Cyprus indicated it may need a bailout before month-end. Markets also remained nervous a Eurozone-unfriendly outcome from Sunday's Greek election is possible. The S&P500 weakened throughout London and NY and is currently down 0.8%. The CRB commodities index is down 0.8% (oil -2.6%, copper +1.0%, gold +0.5%). US 10yr treasury yields reversed lower from 1.72% to 1.58%. Spain's 10yr surged 29bp to 6.51%, and Italy's 10yr surged 26bp to 6.03% - a fresh five-month high – as contagion took hold.

The US dollar index (DXY) bounced around 1.0%. EUR fell from 1.2650 to 1.2483. USD/JPY consolidated in a narrowing 79.35-79.70 range. AUD weakened throughout the London and NY sessions, falling from 0.9990 to 0.9880. NZD weakened from 0.7780 to 0.7700. AUD/NZD probed lower from 1.2870 to 1.2820

Economic wrap

French industrial production up 1.5% in Apr, reversing March's 1.0% decline, although the gain was driven by a weather-related 20% surge in utility output reversing a 19% fall in March. Factory output fell 0.7% in April. Recall that German and Spanish IP data were very soft in April.

Spanish bank bailout enthusiasm wanes. Early gains on stock markets all but disappeared throughout the London session. Immediate implications of the Spain bank bailout are likely reworking of the Irish bailout given it was largely bank related too and then Portugal would expect a new deal with Greece and Ireland getting them.