Recap 1-3-12

Main Items:

  • US ISM improved to 53.9 in Dec vs 53.5 exp and 52.7 prev. Details were quite positive. New orders hit 57.6, the highest print since last April.
  • FOMC minutes:
  1. Fed plans to release participants’ Fed Funds Rate forecasts this month
  2. A number of members indicated that current and prospective economic conditions could well warrant additional policy accommodation, but they believed that any additional actions would be more effective if accompanied by enhanced communication about the Committee’s longer-run economic goals and policy framework
  3. several participants doubted necessity of Nov. Swap line change
  4. the staff’s projection for the increase in real GDP in the near term was little changed


  • UK Mfg PMI improved to 49.6 in Dec vs 47.3 exp and 47.6 prev
  • Italian Mfg PMI improved to 44.3 in Dec vs 43.8 exp and 44 prev
  • German Unemployment declined to 6.8% in Dec vs 6.9% exp and prev
  • Switzerland Mfg PMI jumped to 50.7 in Dec vs 45.4 exp and 44.8 prev
  • Norway Mfg PMI declined to 46.6 in Dec vs 48.4 exp and 48.5 prev
  • The Spanish government has announced that last year’s fiscal deficit could be as high as 8% of GDP, significantly more than the government’s objective for the year of 6%. In the Stability Program published earlier in the year, which laid out the 6% deficit objective, the Spanish government was expecting growth of 1.3% in 2011. The outturn looks like it will be close to 0.7%. The slippage thus has to be more to do with implementation than unexpected growth weakness. – JPM


  • China HSBC Mfg PMI declined to 46.4 in Dec vs 47.1 prev
  • China Non-mfg PMI jumped to 56 in Dec vs 49.7 prev
  • Australia Mfg PMI improved to 50.2 in Dec vs 47.8 prev


Are we seeing the start of a squeeze in EUR/USD? Strong EU equities and strong EU PMI prints were catalysts. Adding to the fuel is the fact that speculative short EUR futures positions are at a record. Over the past 2 months, the 20 day moving average has provided resistance for this 8 figure move lower. A NY closing break above 1.3085 is likely to drive a multi-figure short squeeze higher. Other factors include the fact that the EUR has just bounced off long term support, as well as the fact that the EUR risk reversal skew turned sharply higher starting in mid Nov.