ForexLive US wrap: Slight-of-hand by Italy undermines LTRO

Italian banks create government-backed collateral out of thin air, use it to borrow 23% of LTRO US home sales rise in November; revised much lower for prior years  European consumer confidence falls to 21.2 in December from 20.4 in November US foreclosures jump 21% in Q3, fall 11.8% from Q3 2010 Swiss FinMin: Further measures possible if forex market worsens; examining capital controls and negative interest rates Papademos: Next three weeks critical for Greece Swiss parliament rejects two motions to allow legal framework for negative interest rates S&P: French downgrade would crimp EFSF capacity by a third IMF confident Portugal won't need second bailout EU's Barroso: We're still not fully equipped to defend the euro Italian Senate vote on austerity package tomorrow afternoon Hungary cut to junk by S&P Fitch: US faces downgrade by late 2013 unless deficit cut Moody's affirms Australian at AAA S&P 500 rises 0.2% to 1244 US 10-yr note yield rises 5 bp to 1.97%; Italy rises 19 bp to 6.82% Oil rises $1.66 to $98.90; gold unch at $1615 EUR/USD faded fast early in the US session, falling as low as 1.3025 as the afterglow of the ECB's  "successful" LTRO operation lasted about as long as a Popsicle on a hit summer's day. We rebounded as high as 1.3080 in early afternoon only to slip to 1.3040 after the Hungarian downgrade. EUR/CHF rallied at midday amid comments from the Swiss finance minister suggesting the government is still exploring measures to weaken the franc (or more likely keep it from strengthening much if the euro crisis intensifies). Two measures in the Swiss parliament to allow a legal framework for negative interest rates went down to defeat, so capital controls seem like the only other option. For a country that relies on the provision of financial services for a large percentage of its GDP, capital controls would be a death wish for the sector. AUD got a boost late in the day from an affirmation of its AAA rating by Moody's. It ends just below 1.01.