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Liquidity: abundant but with shorter maturity

- FI Strategizer: "Next week, the data calendar will be very light both in the eurozone and in the US, with the ECB and BoE meetings as the main events. As recent data have shown a slowdown in economic momentum, and there will be no economic releases to challenge this picture, demand for FI assets should remain healthy."
- EU Portfolio Strategy: "Strong or lasting directional trading at the long end of the EGB curve is unlikely next week given the quiet data calendar. We keep duration long."
- ECB: "Next week, the ECB meeting should bring little change in terms of the economic and inflation outlook. The ECB will also disclose the details of the graduated scale of haircuts that will apply to securities other than ABS and government bonds rated in the BBB+ to BBB- range. The new haircuts will be effective from January 2011."
- Inflation: "June flash CPI eased to 1.4% yoy from 1.6%, matching our forecast. The slowdown was probably driven by a base effect on energy. Core inflation was likely steady at 0.8% yoy; while food inflation should have recorded the first non-negative yoy reading in a year."
- MM: "Bids at this week's ECB refinancing operations showed that the liquidity picture is somewhat better than expected. Of the EUR 442bn expiring, only EUR 245bn were rolled over. While the amount is in line with expectations, the split between 3M and 6D was very surprising."
- Supply Corner: "Next week, supply should be quite subdued in the EMU, with just Austria and Germany holding auctions. Supply will then be limited, coming from core and easy to absorb, especially as there are about EUR 20bn of redemptions (coming from France)."
- FX Strategizer: "Fears of a new global growth crisis and the EMU woes are the two pillars behind the return of risk aversion. JPY and CHF will act again as a safe-haven to the detriment of the other FX majors."
- EUR: "EUR-USD has benefited from fears of more sluggish US growth, as also emerged from the labor market report. Yet, we would not ride a rally much above the mid-May high at 1.2675, as EMU woes persist."
- JPY: "Due to prevailing risk aversion, we now see less room for a USD-JPY bounce, not exceeding 100-105 in one year. The margin for a EUR-JPY recovery should be limited too in a still weak EUR-USD scenario."
- CHF: "We also revised down our EUR-CHF forecasts in favor of drop to the 1.29-1.27 area between now and 4Q10. But we still point to a EUR-CHF stabilization between 1.30-1.33 at the end of 1H11"
- GBP: "Cable’s ability to break through again the 1.51 level suggests that any downward correction should be seen again as a near-term potential buying opportunity for sterling against the USD."
- Pacific Rim & CAD: "The AUD recovery following the deal reached on the mining tax may be capped by the RBA that is expected to stay prudent on rates at the next meeting on Tuesday."
- Nordics: "We still keep a positive view on the two Nordics on medium-term perspectives, but both EUR-SEK and EUR-NOK will remain seriously exposed to large and abrupt swings for the time being."
Unicredit Curves & Crosses 20100702

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