Market Update - 22 November 2012

• The negative reaction to the postponement of the decision on Greece by the eurozone finance ministers proved to be short-lived. Comments from Germany's Finance Minister Schaeuble who said there were only "technical questions" to be solved probably helped to ease market fears.

• EU president Juncker also said there were no major political disagreements. The main measures under consideration include using EUR 9bn to buy back bonds at between 30 and 35 cents in the euro. There were also proposals to reduce the interest rate on loans already extended by euro zone countries to Greece from 1.5% to just 0.25% (but Germany opposed such a step).

• USDMYR little moved, and I’m sorry if the updates on USDMYR is the same daily that’s cause there really isn’t anything happening to USDMYR and our local space, the only thing on the horizon is our elections and honestly I haven’t got a clue when this will be despite having countless conversation on this topic with various people. Expect trading range to be in 3.0300-3.0800 for rest of the month.

• Thursday will see the release of the November 'flash' PMI data, where we see the manufacturing index rising slightly to 45.6 and the services index falling to 45.5. Although these readings would support the view that the contraction in the eurozone economy is likely to accelerate in Q4, fading global risks and the Fed's aggressive policy easing should be conducive to a stronger EURUSD.
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  The BoE minutes were in line with Governor King's comments at the release of the Inflation Report last week, indicating that the BoE is in wait-and-see mode at the moment but that further QE next year remains a possibility. One new development is that the MPC discussed whether an appreciation of sterling could damage the supply side of the economy, leading to softer growth and higher unemployment.

• October Japanese trade data provided an excuse to push USDJPY higher to a new seven-month high. Markets remain firmly focused on the prospects for a more aggressive post-election BoJ monetary policy stance, implying that the JPY is likely to remain vulnerable in the near term. But we emphasize again that previous BOJ asset purchases have not been successful at weakened the JPY on a sustained basis.
  News that Israel and Hamas agreed to a cease-fire in talks brokered by Egypt’s Islamist leaders and the US has lent support to risk sentiment. With US Thanks Giving holiday today, we expect markets to be a quiet one. The big move overnight being USDJPY – the pair broke sharply above the 82.00 to 82.50.

• China: November HSBC Flash manufacturing PMI due at 9.45am (GMT+8) will be a key watch today. Prior print stands at 49.5. Given that the economy has bottomed in Q3, a better than expected manufacturing PMI is likely. An improvement above the expansionary mark should help sustain the positive risk sentiment..