JPY Pairs Decline On Profit Taking

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JPY pairs declined sharply but recovered a portion of losses; Euro weakens across the board; French Q3 GDP revised lower; 4 core Greek banks need recapitalization, Italian auction. Focus turns to Chicago PMI and pending home sales.

Throughout the Asian session, majors recovered most of the losses they incurred after yesterday's negative comments from the senate majority leader Reid regarding the fiscal cliff. Later during the London session, a bout of JPY buying hit the market that pushed all JPY pairs lower. Selling was especially strong on EURJPY that fell from 114.60 to 113.29. Other euro pairs declined as well.

EURUSD is trading near session lows around 1.3270 and EURGBP fell to 0.8175. However, commodity dollars are strong, particularly AUDUSD that trades at session highs just a few points below 1.0400.

European reports were limited to final Q3 GDP from France that was revised lower to 0.1% from 0.2% q/q and to a flat reading from initial estimate of 0.2% on annual basis.

In other news, Greek central bank said that four core Greek banks need EUR 27.5 bln in recapitalization before the end of April and German finance minister Wolfgang Schaeuble said in an interview with German newspaper Bild that "worst of the euro crises is behind us".

Italy sold 5 and 10 year bonds totaling EUR 5.87 bln vs. EUR 4-6 bln target. Both average yields were marginally higher but cover was higher.

The US data calendar is limited to Chicago PMI at 9:45 am ET that is expected to rise in December to 51.2 from previous 50.4 and to pending home sales at 10:00 am that are anticipated to fall 0.3% in November after rising 5.2% in October.

Patrik Urban