The drama in the Eurozone periphery continued to reverberate through the marketplace. The initial reaction in Euro was positive as what looked to be some profit taking on short positions coupled with an apparent resolution to the Greek debt drama carried the common currency higher against the greenback. Talk of an agreement for a joint EU-IMF plan for the debt burdened country helped elicit a squeeze in EUR/USD towards the 1.3388 intraday highs. Comments from ECB President Trichet in the latter part of NY trading would see the pair come off the boil, however. Trichet noted that IMF intervention in what is inherently a Eurozone problem would be a very, very bad thing. Euro promptly dropped to fresh lows near the 1.3270 area as the headlines hit the wires.
US economic data came in marginally better and continued to point to improvement overall. Initial jobless claims matched the low for 2010 by printing 442K in the latest week - a drop from 456K prior. This coupled with what is expected to be a significant add from the census hiring should see a doozy of an NFP number when the data are released next Friday. We would not be surprised to see a print north of 200K and at this point we are working with an assumption above that.
That said, we witnessed another sloppy Treasury auction which is anything but constructive for the US dollar. The 7-year auction yield came in nearly 4 basis points above where the market was and this was eerily similar to what happened in the 5-year offering yesterday. Investors are now seemingly demanding a higher rate of return for the risk of investing in US paper and should this trend continue, we could see some pressure on the buck. For now, however, EUR remains the ugliest girl at the party.