–Repeating Updated Story Published 16:57 ET Friday

By Denny Gulino

WASHINGTON (MNI) – Amid signs of a more concerted European push for
crisis action, Treasury Secretary Tim Geithner is visiting both the
German finance minister and the head of the European Central Bank
Monday, the Treasury Department confirmed Friday.

A Treasury Department official said no major announcements are
expected during the trip.

Having warned this week of a Europe at the edge of “the abyss,”
Geithner will travel first to the North Sea resort island of Sylt to
visit German Finance Minister Wolfgang Schaueble at his vacation spot
and then will go to Frankurt to talk to European Central Bank President
Mario Draghi.

The U.S. Treasury Department waited until the U.S. stock markets
closed to confirm the trip, which was announced several hours earlier by
the German Finance Ministry. Although a joint news conference was
originally planned, Schaueble and Geithner now will only pose for
pictures and not answer questions.

A Treasury official said Geithner has been looking for an
opportunity to visit European officials since the G20 meeting in Mexico
in June and thought prior to the August vacation period would be a good
time.

The trip coincides with an end-of-the week rally in European and
U.S. stocks markets that started to build momentum after Draghi said the
ECB would do what it takes to save the eurozone.

Just three days ago, in an interview on the PBS Charlie Rose Show,
Geithner said while European authorities have committed to do what it
takes to hold their financial system together, “They have not been fully
successful yet in making that commitment.”

He went on to say that a “good way to think about the challenge” in
Europe is to say, “If you leave Europe on the edge of the abyss, if you
leave it just teetering on the edge of financial disaster, it’ll be much
harder for this strategy to work.”

Countries like Spain and Italy, he said, “are doing very hard, very
tough, very necessary things” and, he added, “for this to work
politically for Europe and economically for Europe, those reforms need
to be complemented by more support.”

He agreed when Rose interjected, “Some say that Chancellor (Angela)
Merkel believes that she can always come in a rescue at the last
moment.” Geithner responded, “That’s right.”

Geithner then expressed sympathy for Merkel’s position. “What she’s
very worried about is that if they relieve too much of the pressure, the
incentive for reform will fade and they’ll have spent a bunch of
taxpayer’s money of Germany without any real return to make Europe
better.”

He continued, “And again, if you leave Europe on the edge of the
abyss as your source of leverage, your strategy’s unlikely to work
because you’re going to raise the ultimate cost of the crisis — much
more expensive to fix and you’re going to — you do a lot of damage to
the politics of those countries because the human costs of what’s
happening, not just in Greece but across Europe now are enormously
high.”

Geithner repeated that he thinks the Eurozone will survive intact
with its 17 members. “They’ve said ‘We will do everything it takes to
hold the European Union together.’ And you could say that’s what they’re
trying to do, is to make it viable for the long run.”

In another part of the Rose program, Geithner responded to a
question about the effect Europe’s problems are having on the United
States by agreeing the effect is notable.

“Yeah it’s reducing demand for U.S. businesses, for the things they
produce and sell both in Europe and around the world. It’s helping slow
growth everywhere, not just in Europe,” he said.

Concern that “this crisis could intensify is also causing
businesses everywhere to pull back.”

Earlier Friday, Schaueble appeared to welcome Draghi’s pledge to do
whatever is necessary to save the euro, and repeated there is a
necessary precondition, that “politicians also take and implement the
necessary measures to overcome the financial and confidence crisis.”

A spokeswoman for the Spanish government Friday denied reports that
Spain early in the week discussed with Schaueble the possible need for a
300 billion euro rescue if its borrowing costs — which moderated
somewhat later in the week — remain high.

In its annual review of Spain’s economy, the IMF Friday said the
country’s economy will shrink by 1.7% this year and included a warning
of “significant downside risks.” The IMF also saw further contraction
next year of 1.2% for GDP. Both estimates were worse than the IMF’s
previous readings.

The Treasury Department said no other top U.S. officials will be
traveling with Geithner and he will be accompanied by only a very small
group of aides.

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

[TOPICS: M$U$$$,MGX$$$,M$X$$$,M$$CR$,M$G$$$,M$F$$$,MT$$$$,M$S$$$,MGU$$$]

–Updating 13:48 ET Story With Treasury Announcement

By Denny Gulino

WASHINGTON (MNI) – Amid signs of a more concerted European push for
crisis action, Treasury Secretary Tim Geithner is visiting both the
German finance minister and the head of the European Central Bank
Monday, the Treasury Department confirmed Friday.

A Treasury Department official said no major announcements are
expected during the trip.

Having warned this week of a Europe at the edge of “the abyss,”
Geithner will travel first to the North Sea resort island of Sylt to
visit German Finance Minister Wolfgang Schaueble’s at his vacation spot
and then will go to Frankurt to talk to European Central Bank President
Mario Draghi.

The U.S. Treasury Department waited until the U.S. stock markets
closed to confirm the trip, which was announced several hours earlier by
the German Finance Ministry. Although a joint news conference was
originally planned, Schaueble and Geithner now will only pose for
pictures and not answer questions.

A Treasury official said Geithner has been looking for an
opportunity to visit European officials since the G20 meeting in Mexico
in June and thought prior to the August vacation period would be a good
time.

The trip coincides with and end-of-the week rally in European and
U.S. stocks markets that started to build momentum after Draghi said the
ECB would do what it takes to save the eurozone.

Just three days ago, in an interview on the PBS Charlie Rose Show,
Geithner said while European authorities have committed to do what it
takes to hold their financial system together, “They have not been fully
successful yet in making that commitment.”

He went on to say that a “good way to think about the challenge” in
Europe is to say, “If you leave Europe on the edge of the abyss, if you
leave it just teetering on the edge of financial disaster, it’ll be much
harder for this strategy to work.”

Countries like Spain and Italy, he said, “are doing very hard, very
tough, very necessary things” and, he added, “for this to work
politically for Europe and economically for Europe, those reforms need
to be complemented by more support.”

He agreed when Rose interjected, “Some say that Chancellor (Angela)
Merkel believes that she can always come in a rescue at the last
moment.” Geithner responded, “That’s right.”

Geithner then expressed sympathy for Merkel’s position. “What she’s
very worried about is that if they relieve too much of the pressure, the
incentive for reform will fade and they’ll have spent a bunch of
taxpayer’s money of Germany without any real return to make Europe
better.”

He continued, “And again, if you leave Europe on the edge of the
abyss as your source of leverage, your strategy’s unlikely to work
because you’re going to raise the ultimate cost of the crisis — much
more expensive to fix and you’re going to — you do a lot of damage to
the politics of those countries because the human costs of what’s
happening, not just in Greece but across Europe now are enormously
high.”

Geithner repeated that he thinks the Eurozone will survive intact
with its 17 members. “They’ve said ‘We will do everything it takes to
hold the European Union together. And you could say that’s what they’re
trying to do, is to make it viable for the long run.”

In another part of the Rose program, Geithner responded to a
question about the effect Europe’s problems are having on the United
States by agreeing the effect is notable.

“Yeah it’s reducing demand for U.S. businesses, for the things they
produce and sell both in Europe and around the world. It’s helping slow
growth everywhere, not just in Europe,” he said.

Concern that “this crisis could intensify is also causing
businesses everywhere to pull back.”

Earlier Friday, Schaueble appeared to welcome Draghi’s pledge to do
whatever is necessary to save the euro, and repeated there is a
necessary precondition, that “politicians also take and implement the
necessary measures to overcome the financial and confidence crisis.”

A spokeswoman for the Spanish government Friday denied reports that
Spain early in the week discussed with Schaueble the possible need for a
300 billion euro rescue if its borrowing costs — which moderated
somewhat later in the week — remain high.

In its annual review of Spain’s economy, the IMF Friday said the
country’s economy will shrink by 1.7% this year and included a warning
of “significant downside risks.” The IMF also saw further contraction
next year of 1.2% for GDP. Both estimates were worse than the IMF’s
previous readings.

The Treasury Department said no other top U.S. officials will be
traveling with Geithner and he will be accompanied by only a very small
group of aides.

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

[TOPICS: M$U$$$,MGX$$$,M$X$$$,M$$CR$,M$G$$$,M$F$$$,MT$$$$,M$S$$$,MGU$$$]

• US Q2 GDP revised to 1.5% from 2.0%
• German HICP inflation ticks up to 0.4% m/m, 2.0% y/y
• Spanish Deputy PM: No full rescue of Spain
• Merkel and Hollande vow to do everything to protect euro region; “deeply duty-bound” to keep euro zone intact
• University of Michigan consumer sentiment falls to 72.3, lowest reading of 2012
• Fed not constrained bu GDP data: WSJ’s Hilsenrath
• German economic adviser Bofinger: ECB to buy bonds
• Schaeuble and Geithner to meet on Monday
• IMF publishes Spanish  annual article IV review
• Bloomberg: Draghi said to favor giving banking license to ESM; His proposal said to include bond buying, rate cut, new LTRO; Will talk to Weidmann  before council meeting

One of the more volatile sessions of the summer as hopes rise that the ECB and the Eurogroup are getting their act together and coming to table with a substantial package of measures to calm the European bond markets.

EUR/USD reached 1.2390 in thin Friday afternoon trade on a Bloomberg report highlighting an aggressive package of extraordinary measures to steady markets (see headlines). The gains were shortlived as the rally falter ahead of rumored protection of 1.2400, central bank sales into strength and the failure to overcome downtrend resistance at 1.240. We dropped as low as 1.2280 before ending the day just above 1.2300.

It was a risk-on day across the board. Stocks rallied (S&P up 2%), Treasuries fell (yields up 11 bp to 1.545%) and oil closed back above $90.00. AUD ends on its highs, at 1.0480. 1.0500 barriers are in play. USD/CAD closes at 1.0035, quite near the lows amid similar talk at 1.00.

GBP/USD stalled just shy of critical resistance around 1.5780, reaching a high of 1.5767. If we don’t follow-through to the topside early Monday in cable, expect a round of profit-taking.

USD/JPY rallied as high as 78.68 amid better risk appetites and firmer US yields. We close at 78.50. Exporter offers are seen at 78.80 and again at 79.00.

–Democrats Say Report Shows Need For Balanced Deficit Reduction Plan
–Republicans Say OMB Report Shows Flaws in Admin’s Fiscal Policy
–Senate Budget Chief Conrad: Need ‘Comprehensive’ Deficit Cut Plan
–GOP Sen. Sessions: U.S. Is On ‘Dangerously Unsustainable Debt’ Path

By John Shaw

WASHINGTON (MNI) – Congress reacted in a partisan way Friday to the
White House’s mid-session economic and budget report, with Democrats
saying the report shows the need for a balanced, long-term deficit
reduction plan while Republicans argued that it underscores the failures
of President Obama’s fiscal policies.

The Office of Management and Budget’s mid-session report estimates
that the budget deficit for fiscal year 2012 will be $1.211 trillion —
$116 billion less than was projected in February.

Going forward, the OMB sees deficits of $911 billion in FY’13, $661
billion in FY’14, $595 billion in FY’15, $615 billion in FY’16, $576
billion in FY’17, $543 billion in FY’18, $578 billion in FY’19, $604
billion in FY’20, $627 billion in FY’21 and $652 billion in FY’22.

Acting White House budget director Jeff Zients said in a statement
that these estimates assume the “full enactment” of President Obama’s
fiscal policies.

Sen. Jeff Sessions, the ranking Republican on the Senate Budget
Committee, said the report shows the nation is on a “dangerously
unsustainable debt course.”

The U.S., Sessions argued, badly needs a “credible fiscal policy,”
but is not getting one from the administration. He said Obama’s
contention that he has a sound deficit reduction plan is “dramatically
false.”

Senate Budget Committee Chairman Kent Conrad said the OMB report’s
deficit outlook shows the need for a “comprehensive and balanced
long-term deficit reduction plan.”

“That can only happen if both sides agree to move off their fixed
positions. Republicans must yield on revenues and Democrats must agree
to entitlement changes. And it is important that the agreed upon plan be
phased-in carefully so that the changes don’t worsen the fragile
economic recovery,” Conrad said.

Rep. Chris Van Hollen, the ranking Democrat on the House Budget
Committee, said the report shows the urgent need to pass short-term
economic growth measures as well as a long-term deficit reduction plan.

House Majority Whip Steny Hoyer said the OMB report is “yet another
reminder” of the need for a deficit reduction package of about $4
trillion over a decade that includes both spending cuts and revenue
increases.

The Congressional Budget Office will release its mid-year review
next month.

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

[TOPICS: M$U$$$,MFU$$$,MCU$$$]

Hairy stuff on a Friday afternoon. Make you wonder if someone had a huge order in the 1.2380s and was trying to milk it and ended up not being able to get them all out.

What happens if an order goes through a level and you can’t sell them all at a profit? You sell them at a loss.

Looks like we hit an air-pocket on the way down in almost panic selling. Either that, or someone just pasted it when it reached their level…An ugly way to end the week.

Keeps the 1.2400 barrier intact as well as the downtrend.

WASHINGTON (MNI) – The White House’s Office of Management and
Budget Friday released the Mid-Session Review, which updates the
Administration’s estimates for outlays, receipts, and the deficit in
light of economic, legislative, and other developments since the
President’s 2013 Budget was released in February. The following are
excerpts from the report:

Revised Deficit and Debt Outlook

The deficit for 2012 is now expected to be $1,211 billion, down
$116 billion from the deficit of $1,327 billion deficit estimated in
February. As a percentage of GDP, the 2012 deficit is projected to be
7.8 percent of GDP, down from 8.5 percent of GDP in February. This
latest projection also represents a decline in the deficit from 2011,
both in dollar terms and as a percentage of GDP. The reduction in the
estimated 2012 deficit from February is more than accounted for by lower
projections of spending for this year, which are partly offset by lower
projected receipts.

A portion of the lower deficit is due to revised estimates of the
impact of the Administrations proposals for temporary tax relief and
investments to create jobs and jumpstart growth. In the February Budget,
much of the cost of these proposals was estimated to occur in 2012.
However, because most of these proposals have not yet been enacted, the
MSR estimates that these costs will largely shift to 2013 and later
years, which reduces the 2012 deficit.

Relative to the February estimate, the deficit is now projected to
be higher in 2013, estimated at $991 billion as compared to $901 billion
in February. This increase is driven by lower receipt projections and
the shift in costs of the temporary jobs proposals.

Over the 10-year budget window, 2013 through 2021, deficits are now
projected to be $240 billion lower than in February, due almost entirely
to economic and technical revisions that reduce outlays while reducing
receipts by lower amounts. As a percent of GDP, deficits are reduced in
each year of the MSR forecast after 2014. The deficit is projected to
stabilize at 2.6 percent of GDP after 2017, down from an ultimate level
of 2.8 percent of GDP in the February projections.

The lower deficit outlook in the MSR produces correspondingly lower
projections for Federal Government debt held by the public. Debt held by
the public, which is an important indicator of the extent to which
Government activity affects the financial markets, is projected to be
$11,414 billion at the end of 2012, or 73.5 percent of GDP, down from
the estimate of $11,578 billion, or 74.2 percent of GDP, in February.

Debt at the end of 2013 is projected to be $12,572 billion, down
from $12,637 billion in February, but as a percent of GDP is projected
to be slightly higher than in February (77.5 percent versus 77.4
percent) because of downward revisions in the GDP forecast.

Over the longer term, the lower deficits in the MSR result in a
declining path for debt held by the public as a share of GDP. In the
February Budget, deficits stabilized in the second half of the 10-year
budget window at around 2.8 percent of GDP, a level which was sufficient
to hold debt stable at around 76.5 percent of GDP.

The reduction of outyear deficits in the MSR to 2.6 percent of GDP
is sufficient to bring the debt share of GDP down slightly each year,
with debt falling from 77.1 percent in 2017 to 75.1 percent in 2022.
Debt net of financial assets, a measure which nets out financial assets
such as direct loan holdings from the debt level, shows a similar
declining path, falling from 68.4 percent of GDP in 2017 to 66.2 percent
of GDP in 2022.

—

Economic and financial fragility in the Euro area remains a
significant risk to the U.S. recovery and to the global economy. Europe
is the largest export market for the U.S., so weaker demand in Europe
means weaker job growth at home. European banks are interconnected with
financial markets around the world, so volatility in Europe undermines
sentiment in the United States. Because of these concerns, the
Administration has consulted closely with its European counterparts
throughout the crisis and has urged European officials to take steps to
reduce immediate financial market stresses, even as they undertake
longer-term reform and integration plans to promote growth, adjustment,
and stability. Despite these headwinds, the Administration expects
economic growth to continue at a moderate pace in 2012 and 2013 and to
pick up in 2014.

The U.S. economy is operating well below its capacity, with higher
levels of unused resources than at any time in over a quarter century.
The potential for a more rapid recovery is present in this low level of
resource utilization. At some point over the next few years, such an
acceleration in the recovery is likely to occur, and the Administration
forecast reflects that expectation. The Administration does not believe
that the U.S. economy has permanently foregone all of the output lost
during the recession.

—

Real Gross Domestic Product (GDP) and the Unemployment Rate:

Real GDP is expected to rise by 2.6 percent during the four
quarters of 2012 and to increase 2.6 percent in the four quarters of
2013. The growth rate is projected to rise to 4.0 percent in 2014 and
4.2 percent in 2015. Beyond 2015, real GDP growth is projected to
moderate as the level of real GDP approaches its potential. The growth
rate is steady at 2.5 percent per year in 2020-2022. The unemployment
rate is projected to reach 7.9 percent by the fourth quarter of 2012,
below its level in June. Unemployment is projected to decline slowly
this year and next, because of the moderate pace of expected real GDP
growth and because, as labor market conditions improve, workers rejoin
the labor force, adding upward pressure on unemployment. With
accelerated growth, the unemployment rate is projected to fall more
rapidly, eventually stabilizing at 5.4 percent.

Inflation:

Overall inflation rose in early 2012 mainly because of a sharp rise
in world oil prices, and it has moderated since then as oil prices have
declined. Core inflation, which excludes food and energy prices, also
rose, but much less dramatically than the topline measure. Although core
inflation does not include direct energy costs, it does reflect indirect
costs, as energy is used to produce a wide range of goods and services
throughout the economy. For example, airplane fares and trucking costs
bear a close relationship to energy prices. Core inflation was 2.2
percent between June 2011 and June 2012; it had been only 1.6 percent
over the preceding 12 months.

Looking ahead, inflation is expected to edge down somewhat in the
short term. As the economy recovers and unemployment declines in the
medium term, inflation is expected to rise somewhat. In the long run,
the CPI inflation rate is projected to be 2.2 percent per year. The
other main measure of inflation in the projection is the chained price
index for Gross Domestic Product. Year-over-year inflation by this
measure is projected to be 1.7 percent in 2012, and 1.9 percent in
2017-2022.

Interest Rates:

The projections for interest rates are based on financial market
data and market expectations at the time the forecast was developed. The
three-month Treasury bill rate is expected to average only 0.1 percent
in 2012 and 0.2 percent in 2013. It is expected to begin to rise in 2014
and to reach 3.8 percent by 2018.

The yield on the 10-year Treasury note is projected to average just
2.0 percent in 2012, the lowest rate ever recorded for the 10-year note,
which has been issued since 1953. As the economy continues to recover,
the 10-year rate is expected to rise and to reach 5.1 percent by 2019.
In the later years of the forecast, interest rates are close to their
historical averages in real terms, given the projected rate of
inflation.

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

[TOPICS: M$U$$$,MGU$$$,MFU$$$,MCU$$$]

WASHINGTON (MNI) – The White House Friday updated its projection
for budget deficits into 2022, now expecting a $1.2 trillion deficit
this year compared to February’s estimate of $1.32 trillion.

The Mid-Session Review updates estimates of Federal receipts,
outlays, and the deficit for legislation enacted through early July, and
for a revised economic forecast, technical reestimates, and other policy
changes that have occurred since the President’s Budget was released in
February.

The Office of Management and Budget released the Mid-Session
Review, which updates the Administration’s estimates for outlays,
receipts, and the deficit in light of economic, legislative, and other
developments since the President’s 2013 Budget was released in February.

“Relative to the February estimate, the deficit is now projected to
be higher in 2013, estimated at $991 billion as compared to $901 billion
in February,” it said.

Real GDP is expected to rise by 2.6% during the four quarters of
2012 and to increase 2.6% in the four quarters of 2013. The unemployment
rate is projected to reach 7.9% by the fourth quarter of 2012, below its
level in June.

The report called the eurozone crisis a “significant risk” the U.S.
recovery and the global economy. Still, “The U.S. economy is operating
well below its capacity, with higher levels of unused resources than at
any time in over a quarter century. The potential for a more rapid
recovery is present in this low level of resource utilization,” the OMB
said.

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

[TOPICS: M$U$$$,MGU$$$,MFU$$$,M$$CR$,M$X$$$,MT$$$$]

You betcha

Just sayin……

Those of you who bothered to read my European morning wrap would have noted I mentioned “very decent sell orders lined up 1.2380/00″

You know who told me that; just one of the biggest forex banks in the World. How ya like those onions?

Before it’s too late

US DATA: OMB Midsession Budget Review also sees FY13 at -$991b (was
-$901b on costs for temp jobs proposal) and 10y window sees deficits
$240b lower than prior on tech revisions.

US DATA: OMB Midsession Budget Review is out, sees FY12 deficit at
-$1.211T, down $116 billion from the Feb estimate. As a percentage of
GDP, the 2012 deficit is projected to be 7.8 percent vs 8.5% prior.
See http://www.whitehouse.gov/sites/default/files/omb/budget/fy2013/
assets/13msr.pdf

The EURUSD has fallen sharply and is back down testing the 1.2282-86 area.   1.2286 was the  low from June 1.   The close yesterday was 1.2280.  If this move is BS, it is a level to look for buyers

…in an instant.  Back below 100 and 200 hour MA.

An ECB spokes person says it is normal for Draghi to talk with council members before monthly meetings.

No shit.

The news is not that Draghi spoke with Weidmann, the news is that he is going to take an ALL OF THE ABOVE approach to fighting the sovereign debt/banking crisis.

If you’re short and you don’t cover on this pullback, you’ll have no to blame but yourself.

1.2390 was the high on the rally. Looks like 1.2400 is being defended fairly stoutly. EUR/USD trades now at 1.2330 in volatile trade.

–German Fin Min Says Geithner,Schaeuble Joint-News Conference Monday

By Denny Gulino

WASHINGTON (MNI) – The U.S. Treasury Department still had nothing
to say Friday about a German government announcement hours earlier that
Treasury Secretary Tim Geithner is making a sudden trip to Europe to
hold a news conference Monday with Finance Minister Wolfgang Schaeuble.

The silence prompted reporters to resurrect Geithner’s comments
three days ago in which he twice warned European authorities against
leaving Europe on the edge of an “abyss.”

The German Finance Ministry issued a press release saying Schaeuble
and Geithner would hold a joint news conference Monday at a North Sea
resort where Schaeuble is staying, the German island of Sylt near the
Danish border.

The press release provided no details of what is prompting a sudden
trip by Geithner to Europe that has still not been confirmed by the
United States.

Earlier in the week, in an interview on the PBS Charlie Rose Show,
Geithner said while European authorities have committed to do what it
takes to hold their financial system together, “They have not been fully
successful yet in making that commitment.”

He went on to say that a “good way to think about the challenge” in
Europe is to say, “If you leave Europe on the edge of the abyss, if you
leave it just teetering on the edge of financial disaster, it’ll be much
harder for this strategy to work.”

Countries like Spain and Italy, he said, “are doing very hard, very
tough, very necessary things” and, he added, “for this to work
politically for Europe and economically for Europe, those reforms need
to be complemented by more support.”

He agreed when Rose interjected, “Some say that Chancellor (Angela)
Merkel believes that she can always come in a rescue at the last
moment.” Geithner responded, “That’s right.”

Geithner then repeated his “abyss” observation after expressing
sympathy for Merkel’s position. “What she’s very worried about is that
if they relieve too much of the pressure, the incentive for reform will
fade and they’ll have spent a bunch of taxpayer’s money of Germany
without any real return to make Europe better.”

He continued, “And again, if you leave Europe on the edge of the
abyss as your source of leverage, your strategy’s unlikely to work
because you’re going to raise the ultimate cost of the crisis — much
more expensive to fix and you’re going to — you do a lot of damage to
the politics of those countries because the human costs of what’s
happening, not just in Greece but across Europe now are enormously
high.”

Geithner repeated that he thinks the Eurozone will survive intact
with its 17 members. “They’ve said ‘We will do everything it takes to
hold the European Union together,’” Geithner said. “And you could say
that’s what they’re trying to do, is to make it viable for the long
run.”

In another part of the Rose program, Geithner responded to a
question about the effect Europe’s problems are having on the United
States by agreeing the effect is notable. “Yeah,” he said, “it’s
reducing demand for U.S. businesses, for the things they produce and
sell both in Europe and around the world. It’s helping slow growth
everywhere, not just in Europe.”

Concern that “this crisis could intensify,” he said, “is also
causing businesses everywhere to pull back.”

Earlier Friday, Schaeuble appeared to welcome ECB head Mario
Draghi’s pledge to do whatever is necessary to save the euro, and
repeated there is a necessary precondition, that “politicians also take
and implement the necessary measures to overcome the financial and
confidence crisis.”

A spokeswoman for the Spanish government Friday denied reports that
Spain early in the week discussed with Schaeuble the possible need for a
300 billion euro rescue if its borrowing costs — which moderated
somewhat later in the week — remain high.

In its annual review of Spain’s economy, the IMF Friday said the
country’s economy will shrink by 1.7% this year and included a warning
of “significant downside risks.” The IMF also saw further contraction
next year of 1.2% for GDP. Both estimates were worse than the IMF’s
previous readings.

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

[TOPICS: M$U$$$,MGX$$$,M$X$$$,M$$CR$,M$G$$$,M$F$$$,MT$$$$,M$S$$$,MGU$$$]

Why does the average retail trader refuse to accept when the prevailing view has changed.

Mario Draghi sent us the clearest possible signal at midday yesterday and that message has been dramatically amplified today.

Don’t fight the tape. Don’t over-think it.

We know know the stakes. The ECB has do do everything: Cut rates, LTRO, bond buying, banking license for the ESM.

Until they fail to produce all of the above, the market is gonna hold up. Once they disappoint, then it is okay to bet against the euro. It’s pretty futile to buck the trend at this stage.

• Yields up 15 bp on the day to 1.59% versus 1.39% earlier this week.
•  S&P now up 2%

• His proposal said to include bond buying, rate cut, new LTRO
• To hold talks with Buba’s Weidmann before before council meeting on August 2
• Draghi has already secured German and France’s endorsement for a plan to reduce bond yield in Spain and Italy

All according to Bloomberg.

EUR/USD reaches 1.2386.

Sounds like Draghi isn’t just going to use the nuclear option. He’s gonna use all the nuclear options.

The market is set up for failure if he doesn’t give us the full Monti, I mean Mario, now.

1.2400 barriers and technical resistance are the next hurdle for the market. 1.2420 is trendline resistance with the trend extending back to May 1.