FT article.

‘Denial is not just a river in Egypt’

If you’d like to read the article, then do a google search using the headline.

Crossing border for Turkey, many move into Europe, raising tensions; ‘Tragic for a country facing economic crisis’

‘France too will miss its target of reducing the deficit to 3% by next year without further cuts or tax increases. For a new president committed to fighting the present austerity medicine, that’s going to be something of an ask.’

‘Venizelos is due to meet President Karolos Papoulias on Saturday at 11:00 am British Time (1000 GMT) to give up his mandate.’

• Spain injects 15B euros into banks
• Spanish banks told to create bad banks
• Venizelos will return government mandate tomorrow
• Canada adds 58.2K jobs vs 5K exp
• U Mich consumer sentiment hits highest since Jan 2008
• US PPI -0.2% m/m
• Fitch says European downgrades coming if Greece bolts eurozone
• Greece Q1 deficit 9.1B vs 7.37B last year
• Syriza out front in another poll
• European stocks mostly higher
• CAD leads, AUD lags on day
• USD leads, AUD lags on week
• S&P 500 falls 0.3% to 1354; -1.1% on week

Rumors of an Italian downgrade and talk of LTRO3 kept the market on its toes. Risk trades made some headway after the consumer sentiment data but increasing odds of another Greek election and uncertainty about the stability of Spanish banks won out with EUR/USD ending the week near the US low at 1.2917.

USD/JPY traded between 79.80 and 80.00 without much conviction.

Cable made a run higher above 1.61 early in US trading but slumped back to opening levels at 1.6065 near the close. Buyers were rumored in the 1.6050/60 range.

USD/CAD was the big mover in the session, falling to 0.9955 after the jobs report from 1.0045 beforehand. After Europe closed it was a slow climb back higher to parity.

Suck it, Dimon.

Long-term rating to A+ from AA-, all ratings put on watch negative on the losses announced yesterday.

Fitch says further downgrades coming if risks not appropriately sized and addressed.

Full text from Fitch

Down about 160 pips from last week’s close. EUR/USD is gonna be a grind rather than a collapse as there is a constant bid under the market as capital is moved from overseas back to Europe. That trend is only going to accelerate as the EU debt crisis intensifies.

1.2900 is the early target for Asia on Monday morning should there be any surprises over the weekend.  1.2854 is further support if that level gives way.

We end the week solidly below the 61.8% retracement of the 1.2626/1.3487 rally which comes in at 1.2955.

Have a good weekend, all.

The market is smitten with today’s blockbuster Canadian jobs report but it looks like it has gotten ahead of itself.

The probability of a BOC rate hike at the June 5 meeting in the OIS market is up to 29% compared to 15% yesterday. The probability rises to 43%  at the July 17 meting (32% prior) and 55% by the Sept 5 decision (44% prior) .

The June 5 decision is just over 3 weeks away and the Bank of Canada is not prone to surprises, especially when there are so many questions about Europe, growth in the United States and a potential slowdown in China.

Jobs data is backward looking and not that surprising since many people were talking about how unusually soft the numbers appeared early in the year.

The Canadian economy is just about the farthest thing from self-contained on the planet . It’s essentially a proxy for:

1. Commodity prices
2. US growth
3. Worldwide growth

Those three things are tied together and the Bank of Canada won’t hike unless it feels confident about external growth. Granted, Carney has been jawboning about a housing bubble but he made it clear that the BOC won’t hike and hurt the rest of the economy just to keep a lid on house prices.

Canada is a solid economic harbor at the moment but it’s not an island and the same goes for CAD. There is room for relative outperformance against a similar economy like Australia but if Europe, the US or China take a turn for the worse, the loonie will tumble as the BOC heads to the sidelines.

ATHENS (MNI) – Greece’s socialist PASOK leader and former finance
minister, Evangelos Venizelos, was unsuccessful Friday in his
negotiations to form a coalition government and will surrender his
mandate Saturday morning.

President Karolos Papoulias has called a meeting of all parties for
this weekend in a final attempt to convince them to form a coalition or
national unity government, with the participation of as many parties as
possible. If Papoulias fails, he will announce new elections, most
likely June 10 or June 17.

Earlier Friday, Venizelos had a second meeting with the main
far-left opposition party leader, Alexis Tsipras, but there was no
agreement. After the meeting the two leaders attacked each other for not
really seeking a fruitful outcome.

Syriza’s Tsipras once again said he will not participate in any
coalition with the two pro-austerity parties, the conservative New
Democracy and Venizelos’ Panhellenic Socialist Movement (PASOK).

Tsipras underlined that the people voted against any austerity
plans in last weekend’s elections. He stressed, however, that he wants
Greece to stay in the Eurozone.

Venizelos said he hoped “everyone will think more sensibly
during the party leaders meeting” called by the president for the
weekend.

According to leaks that circulated Thursday night, a coalition
between New Democracy, PASOK and the moderate Democratic Left was highly
likely. The three parties have 168 out of 300 parliamentary seats, well
over the 151 votes needed.

But earlier today, Democratic Left leader Fotis Kouvelis said he
would not agree to a coalition without SYRIZA’s participation.

Syriza rejected Kouvelis’s appeal and accused him of changing his
stance and becoming pro-austerity, aligning himself with the
conservatives and socialists.

Venizelos is the third party leader to attempt and fail to form a
government since the elections. The mandate was first handed to New
Democracy leader Antonis Samaras and Syriza’s Tsipras.

–Athens bureau, a_papamiltiadou@marketnews.com

[TOPICS: M$Y$$$,M$X$$$,MGX$$$,M$$CR$,MT$$$$]

The weekly Commitments of Traders report from the CFTC shows speculators piling back dumping euros, putting it in the largest net short position since mid-February:

• EUR short to 143K from 107K
• JPY short to 41K from 50K
• CHF short to 16K from 14K
• AUD long to 25K from 52K
• CAD long to 60K from 70K
• GBP long to 25K from 16.5K
• NZD long to 6K from 8K

The market is now clearly headed for the exits on AUD longs but still adding to GBP positions. Overall US dollar longs increased 62%.

Euro net speculative position:

NEW YORK (MNI) – The New York Federal Reserve Bank announced Friday
it will accept bids from select dealers on more Maiden Lane III assets
next week.

In a statement on its website, the NY Fed said, “In light of
improving market conditions, Maiden Lane III LLC’s investment objective
was revised in April 2012 to allow for the exploration of sales of the
assets held in the portfolio. There is no fixed timeframe for the sales;
at each stage, the Federal Reserve will sell an asset through a
competitive process and only if the best available bid represents good
value for the public, while taking appropriate care to avoid market
disruption.”

Below are details of the security offerings:

Offering Circulation Date: May 11, 2012
Bid Submission Deadline: May 17, 2012
CUSIPs: 26441EAL5, 26441EAA9
Current Face Amount: $1,672,896,114
Broker-dealers Included in the Auction: Citigroup Global Markets Inc.,
Deutsche Bank Securities Inc., Goldman, Sachs & Co., Guggenheim
Securities, LLC, Merrill Lynch, Pierce, Fenner & Smith Incorporated,
Morgan Stanley & Co. LLC, RBS Securities Inc.

–

Offering Circulation Date: May 11, 2012
Bid Submission Deadline: May 22, 2012
CUSIPs: 746869AH9, 746869AK2, 746869AM8, 746869AP1, 746869AR7, 746869BE5
Current Face Amount: $690,567,610
Broker-dealers Included in the Auction: Citigroup Global Markets Inc.,
Credit Suisse Securities (USA) LLC, Goldman, Sachs & Co., Merrill Lynch,
Pierce, Fenner & Smith Incorporated, Morgan Stanley & Co. LLC, Nomura
Securities International, Inc., RBS Securities Inc.

** MNI New York Newsroom: 212-669-6430 **

[TOPICS: M$U$$$,MMUFE$,MGU$$$,MFU$$$,MTABLE]

With changes in administrations there generally comes a realization that the budget picture is worse than it appeared in the run up to the election.

Greece is the best example of that, with the scope of the Greek deficits unknown until Pasok took power in 2009.

Spain’s budget outlook has only worsened since the change in government earlier this year.

Same story looks to be playing out as M. Hollade gets ready to take office.

• Syriza 20.2%
• New Democracy 17.3%
• Pasok 11.6%

Still not clear how a majority is formed after a second round of voting…

The FX market is leading the way as risk trades fall back to the lowest levels of North American trading.

• EUR/USD is back to the lowest levels since Asian trading after breaking through 1.2919. Stops seen below 1.2900.
• AUD/USD is 12 pips away from a fresh 3-month low below 1.0118 but corporate bids are seen from parity to 1.0020.
• Cable bids remain in the 1.6050/60 range.

The market is cutting risk ahead of the weekend due to the possibility (remote) of a political disaster in Greece or a banking disaster in Spain.  A German state election could also spell trouble for Merkel.

We can only hope…

1.2920 was the early low in the US and we are approaching those levels at mid-afternoon.

Barriers at 1.2900 are still in play but are likely out of range this afternoon.

By Kasra Kangarloo

WASHINGTON (MNI) – Housing data, retail sales and the minutes of
the Federal Open Market Committee’s two-day April meeting will compose
the bulk of economic news releases in the week ahead.

As far as data goes, U.S. retail sales will likely be the market
mover of the week. April sales are forecast to be much softer compared
to gains over the past quarter, which beat market expectations in all
three months.

Though consumer confidence has held steady in recent reports, even
against rising gas prices and renewed uncertainty around the job market,
consumption may be due for a slowdown.

It should also be noted that advanced data — such as retail sales
– are often volatile and difficult to forecast, making surprises in
either direction much more likely.

Retail sales will be released Tuesday at 8:30 a.m. ET.

Housing data for the week include the National Association of
Homebuilders’ housing market index for May, out Tuesday at 10:00 a.m.
ET, and April data for housing starts and building permits, to be
released Wednesday at 8:30 a.m. ET.

Housing starts are forecast to see a sizable boost after permit
applications rose to their highest level since 2008. The story so far
has been that construction of multi-family housing — condos and
apartments — have been one of the few bright spots in an otherwise
depressed market, as both home sales and prices are still struggling to
gain traction.

This has also been reflected in the NAHB index, which has seen
renewed strength in the last few months. May’s data may give further
credibility to that narrative, or they could be another bump in the
road.

Though the minutes of the FOMC’s April 24-25 meeting will probably
contain no surprises — as the committee’s statement revealed no policy
changes — there is always the possibility, no matter how small, of
clues that could foretell the next great policy shake-up.

However, as job creation is mostly stable — albeit weaker than
almost anyone would like — and inflation is more or less contained,
this will likely not be the case.

Odds are that any market movement will be due to the overall tone
of the minutes as related to the strength and future of the economic
recovery.

The FOMC minutes will be released Wednesday at 2:00 p.m. ET.

Two of the more notable regional manufacturing surveys — those
conducted by the Federal Reserve banks of New York and Philadelphia —
are expected to pare back from last month’s unexpected drops, which had
reversed several months of consecutive gains in both indexes.

It should be noted, however, that the widespread drops seen in last
month’s regional surveys were followed by an unexpected rise in the
Institute of Supply Managers’ national manufacturing index, showing
again that month-to-month changes don’t always fit the broader trend.

The New York Federal Reserve’s manufacturing index will be released
Tuesday at 8:30 a.m. ET, and the Philadelphia Federal Reserve’s
manufacturing index will be released Thursday at 10:00 a.m. ET. Both
releases are for May.

So long as the job market remains uncertain, initial jobless claims
will worth watching. Data for the May 12 week will either reverse or
continue the positive trend seen in the last two weeks: claims have
retreated back to March levels, below 370,000, a range that is
historically consistent with strong job growth.

April’s Producer Price Index contained a pleasant surprise for
markets, in the form of a higher-than-expected drop in energy prices.
The Consumer Price Index for the same month, to be released Tuesday at
8:30 a.m. ET, will likely show the same trend.

Other releases over the week include March Treasury International
Capital Flows data, to be released Tuesday at 9:00 a.m. ET, March
business inventories, to be released Tuesday at 10:00 a.m. ET, April’s
industrial production release Wednesday at 9:15 a.m. ET, the Conference
Board’s leading economic indicators, also for April, Thursday at 10:00
a.m., and the Mortgage Bankers Association’s weekly mortgage
applications index Wednesday at 7:00 a.m. ET.

Speeches by Federal Reserve officials, listed below, will be light
next week:

Federal Reserve Governor Elizabeth Duke will speak on the housing
market in Washington, D.C. Tuesday at 9:30 a.m. ET.

St. Louis Federal Reserve Bank President James Bullard will speak
on the U.S. economy in Louisville, Kentucky Wednesday at 12:30 p.m. ET.

–Kasra Kangarloo is a reporter for Need to Know News

** MNI Washington Bureau: 202-371-2121 **

[TOPICS: M$$FI$,M$U$$$,MAUDS$]

According to Intrade, there is a 33% that a country will announce that it’s leaving the euro before New Years Day but it’s taken a wobble from 40% yesterday.

UK bookmaker Ladbrokes suspended betting on Greece leaving the euro after repeatedly cutting the odds.

I would say it’s much higher than 30%, probably above 50%, but they could move to some sort of mixed system and the slimy bookmakers wouldn’t pay.

Three bites at the apple so far but no one has been able to form a majority. Looks like new elections are sure bet.

• Venizelos insists on unity government
• Unity government will implement bailout
• Greek people, not Syriza reject unity government

And on to elections we will likely go…