Forex News: Bond futures contracts traded lower Monday after the US Treasury and Fed's proposals aimed at shoring up ailing mortgage lenders Fannie Mae and Freddie Mac calmed jittery equity markets and prompted a reversal of recent safe-haven flows. September bunds pared declines after weaker-than-expected May euro zone industrial output data, -0.6% year-on-year versus forecast +0.4%, pointed to slower economic growth. At 1100 GMT, the September bund contract was down 0.26 at 111.80, within a 111.57-111.89 range. Meanwhile, December Euribor was unchanged at 94.895. Gilts headed lower in a tight trading range. Comments from MPC member Barker, who suggested the BOE was in no rush to raise UK interest rates, lent modest support. Record high PPI numbers, which showed input PPI soaring by 30.0% on the year in June and output PPI climbing by 10.0%, had little market impact. At 1100 GMT, September gilts were down 0.24 at 106.10, in a 106.05-106.28 range, while December short sterling was down 0.01 at 94.07.
The GSE rescue plan continued to underpin the dollar although gains were minimal in Europe. Sterling benefited from flow expectations connected with Santander's GBP 1.3B approach for Alliance and Leicester. JPY is off highs as risk aversion slipped on the back of lower oil, at $143bbl and higher stocks, with Europe up between 1.5% to 2%. EUR/USD traded in a 1.59-1.5840 corridor, GBP/USD 1.9820-1.9880 while USD/JPY held around 106.50.
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