By FXEmpire.com
Analysis and Recommendations:
The EUR/USD is trading at 1.2198 as eurozone weakness continues. The absence of data and a desire to pare risk ahead of the weekend is driving widespread USD strength as we approach the NA session. JPY is flat and outperforming on the crosses, while CAD, AUD & GBP are underperforming slightly. EUR is weak against all of the majors and declining as markets continue to focus on developments in Spain.
There are no US data releases today, and headline risk is likely to be minimal in the absence of official meetings. Global equities aren’t in such a jovial mood today, and the catalysts behind this mood swing are fairly thin but rooted in intensifying concerns about funding pressures affecting stressed European sovereign credits and China’s persistent bias in favor of tight property lending conditions. Currency markets are reinforcing the negative mood with almost all of the major crosses pushing lower against the USD except for the yen.
The commodities complex is also correcting lower with oil and gold off and mixed performances being put in across the metals and agricultural commodities. Spain’s funding costs are getting crushed this morning with the 10 year note back up above 7% at the time of writing. My bias is that the US earnings season offers short-term relief to the risk trade, but the backdrop remains very unkind amidst the very real prospect of further debt restructurings/reprofilings out of Europe including Spain. Italy’s funding costs are also under more intense pressure this morning with its 10 year note rising above 6% again. Yields in both countries are not sustainable as the interest cost across the full term structure of rates rises at a faster pace than tax revenues driven by poor nominal GDP growth. US 10s are gently rallying.
The US economy has once again stalled out in 2012H2, and that will become more evident with next Friday’s Q2 GDP print that will be the key global release of the week. Scotia Economics figures the US grew at a paltry 1.6% q/q annualized rate which is largely a consensus (1.5%) view. The very high end of the current consensus points to 1.9% growth, while the low end sits at 0.8%. Don’t get too caught up in the albeit important risks emanating from Europe and Asia, as the Fed’s dual mandate is principally focused upon the very large domestic economy which is sharply disappointing to the downside this year. Q1 growth of 1.9% was largely an autos story, which if taken out of the picture, left behind an economy growing at less than 1% in Q1 which may well be repeated in Q2 and thus reflecting a stalled out economy. The politics to it all is often grossly misunderstood by way of forgetting that it is Congress that mandated – rightly or wrongly – the Fed to adhere to a dual mandate and to respond with policy action should growth and/or inflation disappoint to the downside as is very much the case. Unless Congress wishes to alter that mandate, then politics motivates a steady easing bias at the Fed.
Next week might be a make it or break it week.
FxEmpire provides in-depth analysis for each currency and commodity we review. Fundamental analysis is provided in three components. We provide a detailed monthly analysis and forecast at the beginning of each month. Then we provide more up to the data analysis and information in our weekly reports
Economic Data July 20, 2012 actual v. forecast
|
Date |
Time |
Currency |
Event |
Actual |
Forecast |
Previous |
|
Jul. 20 |
02:30 |
AUD |
Import Price Index (QoQ) |
2.4% |
1.5% |
-1.2% |
|
04:00 |
NZD |
Credit Card Spending (YoY) |
4.6% |
3.9% |
||
|
06:00 |
EUR |
Estonian PPI (MoM) |
0.00% |
0.00% |
||
|
07:00 |
EUR |
German PPI (MoM) |
-0.4% |
-0.2% |
-0.3% |
|
|
07:00 |
EUR |
German PPI (YoY) |
1.6% |
1.8% |
2.1% |
|
|
08:00 |
DKK |
Danish Retail Sales (YoY) |
-1.2% |
-0.5% |
||
|
08:30 |
EUR |
Dutch Consumer Spending |
-1.90 |
-2.10 |
||
|
09:30 |
GBP |
Public Sector Net Borrowing |
12.1B |
11.0B |
16.1B |
|
|
13:30 |
CAD |
Core CPI (MoM) |
-0.4% |
-0.1% |
0.2% |
|
|
13:30 |
CAD |
CPI (MoM) |
-0.4% |
-0.1% |
-0.1% |
|
|
13:30 |
CAD |
CPI (YoY) |
1.5% |
2.0% |
1.2% |
Upcoming Economic Events that affect the CHF, EUR, GBP and USD
|
Date |
Time |
Currency |
Event |
Previous |
|
Jul 24 |
7:00 |
EUR |
French Flash Manufacturing PMI |
45.2 |
|
7:00 |
EUR |
French Flash Services PMI |
47.9 |
|
|
7:30 |
EUR |
German Flash Manufacturing PMI |
45.0 |
|
|
7:30 |
EUR |
German Flash Services PMI |
49.9 |
|
|
8:00 |
EUR |
Flash Manufacturing PMI |
45.1 |
|
|
8:30 |
GBP |
BBA Mortgage Approvals |
30.2K |
|
|
9:00 |
EUR |
Flash Services PMI |
47.1 |
|
|
13:00 |
USD |
Flash Manufacturing PMI |
52.5 |
|
|
Jul 25 |
8:00 |
EUR |
German Ifo Business Climate |
105.3 |
|
8:30 |
GBP |
Prelim GDP q/q |
-0.3% |
|
|
10:00 |
GBP |
CBI Industrial Order Expectations |
-11 |
|
|
13:00 |
EUR |
Belgium NBB Business Climate |
-13.2 |
|
|
14:00 |
USD |
New Home Sales |
369K |
|
|
14:30 |
USD |
Crude Oil Inventories |
||
|
Jul 26 |
6:00 |
EUR |
GfK German Consumer Climate |
5.8 |
|
8:00 |
EUR |
M3 Money Supply y/y |
2.9% |
|
|
12:30 |
USD |
Core Durable Goods Orders m/m |
0.7% |
|
|
12:30 |
USD |
Unemployment Claims |
||
|
14:00 |
USD |
Pending Home Sales m/m |
5.9% |
|
|
Jul 27 |
27th-31st |
GBP |
Nationwide HPI m/m |
-0.6% |
|
All Day |
EUR |
German Prelim CPI m/m |
-0.1% |
|
|
7:00 |
CHF |
KOF Economic Barometer |
1.16 |
|
|
12:30 |
USD |
Advance GDP q/q |
1.9% |
|
|
13:55 |
USD |
Revised UoM Consumer Sentiment |
72.0 |
Click here to read EUR/USD Technical Analysis.
Originally posted here
