The euro was sold yet again overnight against the dollar, yen, Swiss franc, and Canadian dollar as Italy auctions off another round of debt - this time slightly higher maturities that my we had seen yesterday. The auction was mixed with Italy not meeting the upper range of its target though yields did fall from levels seen in November.

From Bloomberg: Italy auctioned 7.02 billion euros ($9 billion) of bonds, falling short of the target, as borrowing costs declined in its final debt sale of the year.

The Treasury in Rome sold 2.5 billion euros of securities due in 2014, less than the 3 billion euro maximum for the sale, to yield 5.62 percent, down from 7.89 percent at the previous sale on Nov. 29. The Treasury priced 2.5 billion euros of its 5 percent 2022 bond to yield 6.98 percent, compared with 7.56 percent on Nov. 29. Italy also sold about 2 billion euros of bonds due 2021 and a floating-rate security due 2018.

width=400The sale, which aimed to raise 8.5 billion euros, came one day after Italy auctioned 9 billion euros in treasury bills for 3.251 percent.

The euro stabilized following the initial reaction to the debt auction and managed to reverse some of its losses against key currency pairs. The 10-year yield traded above 7% in the wake of the auctions and the EUR may still come under pressure in NY trading.

Italian Prime Minister said that the government will present measures to boost growth by the end of January. that would include a broad package of liberalizations, welfare and labor market reforms.

From STLToday: Italy's Premier Mario Monti says he's encouraged by the results of two days of bond auctions which saw Italy's borrowing costs drop. But at a year-end press conference Thursday, he said he didn't consider the market turbulence to be over.

Money Supply and Private Lending Very Soft in November

While economic data was rather sparse and we continue to await the reporting of German CPI data for December we did see interesting under shooting in terms of the Euro-zone money supply and private loans.

The M3 money supply for the month of November grew by 2% annual rate, much lower than the 2.5% forecast or the 2.6% reading we had in October. Private loans meanwhile rose the annual pace of 1.7% during the month of full 1% lower than expectations of 2.7%.

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From Financial Times: Economic data on Thursday was on the weak side as annual growth in loans to the private sector fell in November, presenting further evidence of slowing business activity across the continent.

Tighter fiscal policy, squeezed consumer purchasing power, the heightened eurozone sovereign debt crisis, weaker global growth and financial market turmoil are taking a major toll on economic activity across the region, said Howard Archer at IHS Global Insight.

It's interesting considering the amount of liquidity and extra credit created by the ECB over the last six months and it shows that businesses and households are reluctant to borrow - or that banks are reluctant to lend. Easing in the growth of the money supply should also mean that inflation is kept under wraps for the time being.

- Nick Nasad is the Chief Market Analyst at FXTimes - provider of Forex News, Analysis, Education, Videos, Charts, and other trading resources.