GBP-EUR		1.1971
		GBP-USD		1.56293
		GBP-AED		5.74
		GBP-JPY		134.823
		GBP-CAD		1.61546
		GBP-CHF		1.62415
		GBP-HUF		340.61
		GBP-TRY		2.3624
		GBP-AUD		1.73732
		GBP-ZAR		11.4772
		GBP-NZD		2.1644

		GBP-PLN		4.7950
		GBP-HKD		12.1384
		GBP-THB		50.33
		EUR-GBP		0.8348
		EUR-USD		1.3049
		EUR-AED		4.7917
		EUR-TRY		1.9724
		EUR-AUD		1.4505
		USD-CAD		1.0327
		USD-JPY		86.28

Main News Daily Update

 

The British pound has extended its five day advance and looks poised to test 1.580 over the medium term as policy makers are slowly shifting to the side of Andrew Sentence, and recently stating that the increase in the value added tax in 2011 will put upward pressure on consumer prices. Thus, we may see inflation remain above the central bank’s target longer than expected. Market participants will shift their focus to the GfK consumer survey report. As of late, economists are forecasting the reading to fall to -20 from -19. 

 

In Spain, Acceleration in inflation in July (+1.9%), driven by the VAT hike. According to the preliminary estimation published by INE, prices – measured by the harmonised consumer price index – increased by 1.9% y/y in July, after 1.5% in June. Month-on-month, consumer prices probably decreased by 0.5% (driven by summer sales), after a 0.2% rise in June. No breakdown is available yet, but it seems that the VAT hike – into force since the 1st of July (but largely anticipated by retailers) – was the main driver of the year-on-year increase in consumer prices. However, these exceptional and seasonal effects should not hide the underlying trend. Headline inflation is likely to rise further in the coming months, in line with rising oil prices. Moreover, weak domestic demand and rising unemployment rate are expected to put core prices – which exclude energy and fresh food – under pressure in the coming quarters. On average, headline inflation is forecast to increase by more than 1.5% in 2010 (after -0.2% in 2009), while core inflation is expected to nearly stagnate in 2010 and decrease in 2011. In Germany, The unemployment rate decreased in July (to 7.6%). The unemployment rate fell slightly in July (to 7.6%, after 7.7% in June). The number of unemployed decreased again in July (-0.6% m/m, after -0.6% m/m in June). The number of unemployed has thus fallen by 281K since July 2009 and it is now around 20K above the trough reached in October 2008. The positive evolution in employment index of the composite PMI since the beginning of 2010 (at 53.6 in July, after 52.3 in June) suggests that employment should increase in the coming months. In Eurozone, Economic Sentiment Indicator rose sharply in July (up to 101.3) In July survey data confirmed that eurozone recovery is on track. The Economic Sentiment Indicator (ESI), a good gauge of GDP growth rose to 101.3 in July, above its long-term average, reaching its highest level since March 2008. This strong reading is due mainly to the excellent performance of Germany; the German ESI rose by 4 points to 110.1, its highest reading in three years. While today data signal that the eurozone economy is still expanding at rapid pace, activity is likely to moderate over the last quarter of the year. Global growth, which sustained the strong recovery in the manufacturing sector, is losing momentum and fiscal tightening is likely to weigh significantly on domestic demand. As regard prices, the survey still showed that inflationary pressures were moderate. various releases are scheduled including July’s euro-zone "flash" CPI estimate and the latest unemployment rate. For the former, we expect an annual rate of 1.7% reflecting a pull-back in energy prices a year earlier. We look for the unemployment rate to remain steady at 10%. Finally, in the UK, the GfK consumer confidence survey is due where we envisage an unchanged outturn of -19.

 

Today’s main data highlight is the advance estimate of Q2 GDP in the US, where we look for 2.8% annualised growth, against a final Q1 outturn of 2.7%. Following Fed Chairman Ben Bernanke’s testimony last week, financial markets continue to perceive significant uncertainty regarding the outlook for US economic activity. Forward-looking business surveys, for example, have been largely disappointing in recent weeks. Consumer confidence – weighed down by a slow pace of private sector job creation – is a case in point. This afternoon sees the final University of Michigan confidence report for July, where we look for an outturn of 65.5 compared with the “flash” estimate of 66.5. St. Louis Fed President James Bullard held a dovish outlook for inflation and said the U.S. faces a similar scenario to Japan as price growth falters, and argued that the FOMC should “expand the quantitative program through the purchase of Treasury securities” in an effort to mitigate the risks for deflation. Although, Mr. Bullard said he expects the downside risks for inflation to subside once the recovery comes into full swing, and warned that keeping the benchmark interest rate at the record-low for too long could be counterproductive and may “encourage a permanent, low nominal interest rate outcome.” In addition, Dallas Fed President Richard Fisher noted further easing in monetary policy could have limited impact on the real economy as households and businesses “are beset by unmanageable uncertainty,” and sees a risk for the economy to be “sailing forward at suboptimal speed, despite the fact that the cost of borrowing is low, equity markets have shown resilience, and liquidity is plentiful.” The comments from the heads of the district central banks suggests the Fed may opt to expand monetary policy further over the coming months in an effort to strengthen the recovery, and may see scope to hold borrowing costs close to zero going into 2011 to counter the substantial amount of slack within the real economy. Nevertheless, as the world’s largest economy is projected to expand at an annualized pace of 2.5% in the second-quarter, with personal consumption forecasted to increase 2.4% following the 3.0% rise during the first-three months of the year, the slower pace of growth could weigh on market sentiment as policy makers anticipate to see a moderate recovery going forward. At the same time, the final reading for the U. of Michigan confidence survey is expected to come in at 67.0 for July from an initial forecast of 66.5, but the market may neglect the upward revision as households continue to face tightening credit conditions along with the ongoing weakness in the labour market.

 

Yesterday Ukrainian Deputy Prime Minister, Sergey Tigipko, said that the government expects to receive the first $1.89 billion disbursement under Ukraine’s new IMF programme within a few days. This is certainly good news and should further help to stabilise the fragile recovery in the Ukrainian economy. There is quite a bit of EMEA macroeconomic data on the agenda today, but none is likely to bring big market-moving news. Most interesting will probably be Estonian industrial production for June. It will be interesting to see whether the Estonian manufacturing sector has continued to recover or if there are any signs of a soft-spot, similar to what we have seen in Estonian confidence indicators recently.

 

	Todays report was brought to you by     Ashley Ingle

		GBP-EUR		1.1968
		GBP-USD		1.56381
		GBP-AED		5.745
		GBP-JPY		136.339
		GBP-CAD		1.6136
		GBP-CHF		1.64341
		GBP-HUF		339.65
		GBP-TRY		2.3636
		GBP-AUD		1.73348
		GBP-ZAR		11.4002
		GBP-NZD		2.1498

		GBP-PLN		4.788
		GBP-HKD		12.1415
		GBP-THB		50.34
		EUR-GBP		0.8356
		EUR-USD		1.30632
		EUR-AED		4.7979
		EUR-TRY		1.9745
		EUR-AUD		1.45796
		USD-CAD		1.0315
		USD-JPY		87.18

Main News Daily Update

 

Wednesday’s testimony by the Bank of England MPC members to the Treasury Select Committee highlighted the wide range of views about the risks surrounding the UK economic outlook. One of the risks is the renewed weakness in the housing market as one of the reasons why any discussion of policy tightening is far too premature and further easing may yet be required to assure that growth momentum is sustained. House price indices have began to roll over in the past few months and leading indicators, such as mortgage approvals and net mortgage lending, suggest no immediate respite on the horizon. In June, Lloyds TSB expect both series to have remained subdued, with approvals slipping to 47k and net mortgage lending declining to £1.1bn. Mortgage Approvals are expected to fall for the second consecutive month in June while Net Consumer Credit growth slows from the previous month over the same period. The figures will reinforce dovish comments from BOE policymakers delivered in testimony to the Parliament’s Treasury Committee, where governor Mervyn King downplayed the stronger-than-expected second quarter GDP result to stress lingering uncertainty about the recovery in general and inflation in particular, signalling monetary policy is firmly stuck in accommodative territory for the time being.

 

In Germany, Inflation up to 1.1% in July. CPI inflation rose to 1.1% in July, up by 0.2 point in comparison with June. Base-effects linked to energy and food prices (in particular in seasonal food sector) underpinned inflation. Inflation should continue to increase slightly over next months. Indeed, firms should partially pass the increase in import goods prices on to final prices.  In the eurozone, the focus will be on the publication of the European Commission economic confidence readings which we expect to show very little change in the overall regional sentiment in the month of June. While in Germany, the latest labour market data are expected to indicate that unemployment was fairly static in July as companies remain reluctant to take on labour given the uncertain global economic outlook.

 

In US, Lower durable goods orders in June, for the second consecutive month. Durable goods orders dropped for the second consecutive month in June, by 1.0% m/m. These disappointing data mainly reflected lower transportation and defence orders. By contrast, less volatile “core” orders – i.e. non-defence capital goods excluding aircraft – were up for the second consecutive month, by 0.6% m/m. Durable goods shipments have been up by 9.4% q/q annualised in the second quarter, pointing to another sharp increase in expenditure in equipment and software. Early signals indicate slower growth in manufacturing activity, pointing to weaker investment growth in future quarters. EUR/USD looks like it will explode sooner or later after having traded immensely close to 1.30 for days now. If equity markets return to the positive mood, it will be on the upside; if the air goes out of the balloon it will be on the downside.  Fed‟s Beige Book showed that commercial real estate and expiration of a tax credit for homebuyers were weighing on the economy in some areas. “Economic activity has continued to increase, on balance, since the previous survey” the Fed said yesterday while noting that two of the Fed‟s 12 districts reported the economy „held steady‟ and two said expansion slowed. Housing markets were characterized as "sluggish" while labour market conditions were described as "improving modestly". All in all, a not so cheering affair, as could be expected after Bernanke‟s soft testimony last week.

 

Yesterday we got a pleasant surprise when Lithuanian Q2 GDP numbers surprised positively. Hence, GDP grew by 1.1% y/y in Q2 South African inflation (CPI) eased to 4.2% y/y in June – well below the consensus expectation of 4.5% y/y and comfortably within the South African Reserve Bank’s inflation target of 3-6%. The number clearly keeps the door open for a rate cut from SARB and South African market rates and yields dropped on the back of the number. Furthermore, the continue overvaluation of the rand is also an argument for cutting ratings in South Africa. That said, there is certainly not room for aggressive monetary easing and if we are going to see further monetary easing it is unlikely to be more than a single cut. It is a relatively light calendar today. Focus on producer prices data out of Hungary and South Africa. Danske do not expect the data to be market-moving. The Czech koruna undoubtedly is the EMEA currency that Danske are most bullish on – both short-term and long-term. Yesterday, the koruna hit the strongest level against the euro in 20 months.

 

	Todays report was brought to you by     Ashley Ingle

		GBP-EUR		1.1986
		GBP-USD		1.55871
		GBP-AED		5.725
		GBP-JPY		137.135
		GBP-CAD		1.60712
		GBP-CHF		1.65175
		GBP-HUF		338.54
		GBP-TRY		2.3538
		GBP-AUD		1.74049
		GBP-ZAR		11.4757
		GBP-NZD		2.1363

		GBP-PLN		4.7916
		GBP-HKD		12.1102
		GBP-THB		50.22
		EUR-GBP		0.834
		EUR-USD		1.30054
		EUR-AED		4.7753
		EUR-TRY		1.9637
		EUR-AUD		1.45209
		USD-CAD		1.0313
		USD-JPY		87.97

Main News Daily Update

 

Confidence in the British pound is a fragile thing. Support needs to be found through fiscal stability, interest rate potential and economic expansion to support expectations that the sterling is on strong enough to catch up to its largest counterparts. Today, the single currency was provided a particularly strong boost from an oftentimes overlooked indicator. The CBI’s distributive trends report (a proprietary reading of retail activity) far outstripped expectations with a net 33 percent of respondents reporting a boost in sales – the highest reading since April 2007. Today marks the first of four key BoE events that take place over the next four weeks that could decide the direction of sterling and gilts over the remainder of Q3. The testimony to the TSC has not been kind to GBP over the last three sessions. Admittedly the last three testimonies took place in a different economic and political context compared to today and therefore need not necessarily be a guide to what to expect today. If we trace the rally in sterling and firmer yields to the relief bounce in risk post EU stress tests and ‘generous’ new Basel leverage rules, then one wonders if today’s TSC testimony will disrupt momentum. What is clear is that investors have ignored the more dovish rhetoric from the July minutes and individual MPC members, instead playing up to the weaker USD and bullish price action in stocks. The risk is that governor King reins in optimism and warns of the numerous pitfalls ahead. The TSC hearing features governor King and lone hawk Sentance among others; we are interested to hear from the governor what he makes of the strong Q2 GDP numbers last week and how confident he is of predicting the outlook for a more mediocre second half.

 

The preliminary German CPI is expected to have risen by a modest 0.1% in July to be 1.0% higher than a year ago. This follows annual inflation moderating to 0.8% in June. At July’s ECB press conference, Jean-Claude Trichet noted that some pick-up in price pressures were likely in the short-term. Although the money supply expanded for the first time in eight months in June, that outcome did not take into account July’s expiry of the ECB’s 12-month repo – a lending facility allowing European banks to secure access to the central bank’s funds for a year – which amounted to large liquidity drain and put upward pressure on short-term borrowing costs. Indeed, European 2-year yields overtook those of the US for the first time in three months at the beginning of this month and now trade at a 25bps premium, meaning Euro Zone monetary conditions are at their most restrictive since mid-February. With borrowing costs set to push higher still as governments issue debt to finance their gaping deficits and economic growth likely to slow amid a lurch toward austerity, the path of least resistance for the ECB points toward (at least) a static posture, with the possibility of greater easing seemingly far greater than that of tightening.

 

After declining in May, US durable goods orders are expected to have rebounded, up 0.5% on the month in June. Conversely, we are looking for a moderation in durables excluding the volatile transportation component, as underlying demand remains muted. However, as demonstrated by the stronger than expected US home sales earlier in the week, Lloyds TSB do not believe there will be any significant reaction to the result as investors await the advance estimate of Q2 GDP on Friday. The release of the Fed’s Beige book is not expected to provide any ‘new’ information with the commentary reiterating the dovish tone of the June FOMC minutes and Fed Chairman Bernanke’s testimony last week.

 

Data on South African inflation in June is also due to be released today. This number could get some attention following last week’s decision by the South African central bank to leave rates unchanged. Risk appetite seems to be returning and that has helped EMEA markets since the start of the week. Most notable in our view is the continued strengthening of the South African rand – against all odds.

 

	Todays report was brought to you by     Ashley Ingle

		GBP-EUR		1.192
		GBP-USD		1.5479
		GBP-AED		5.686
		GBP-JPY		135.248
		GBP-CAD		1.59531
		GBP-CHF		1.63795
		GBP-HUF		339.65
		GBP-TRY		2.3445
		GBP-AUD		1.71144
		GBP-ZAR		11.3611
		GBP-NZD		2.1036

		GBP-PLN		4.7816
		GBP-HKD		12.0206
		GBP-THB		49.73
		EUR-GBP		0.8387
		EUR-USD		1.29826
		EUR-AED		4.7648
		EUR-TRY		1.9662
		EUR-AUD		1.4351
		USD-CAD		1.03
		USD-JPY		87.35

Main News Daily Update

 

Retail sentiment will be the main focus in the UK, with the CBI due to release its latest Distributive Trades Survey. Given the 1% rise in June retail sales (ex fuel), the CBI reported sales balance is expected to have bounced from -5% to +3% in July. Elsewhere, eurozone M3 figures are likely to confirm money growth remains stagnant.

 

The Irish economy returns to growth, driven by a cyclical upturn in exports, though domestic demand remains weak. GDP expected to increase by 0.75% in 2010, before growing by 3.5% in 2011, as the recovery in domestic demand picks up pace. Structural problem of over-indebtedness remains and household deleveraging and Government retrenchment will remain key themes for the next few years. Unemployment is also expected to remain high as the economy restructures to a smaller construction sector, although emigration of foreign migrants will ease transition.

 

With money, bond and equity markets having broadly welcomed the results of the EU bank stress tests, the first major hurdle of the week appears to have been negotiated reasonably successfully. Focus now turns to a spate of US activity data over the balance of the week, which should help shape US growth expectations as we head through the second half of 2010. On the face of it, yesterday’s better-than expected new home sales figures provided a reasonable start, with sales rising by 24% to 330k in June. The improvement, however, was purely due to a massive 37% drop in the May data, to a downwardly revised new record low (of 267k). Today’s US consumer confidence report is likely to confirm that underlying sentiment, in the consumer sector at least, is beginning to flag. Lloyds TSB expect consumer confidence to have slipped from 52.9 to 51.8 in July, with the risk to the downside, as the softening housing market starts to take its toll.

 

Yesterday, the Latvian Parliament unanimously voted for the revised insolvency law, which had been returned to the Latvian parliament by the Latvian President Valdis Zatlers. The new insolvency law significantly strengthens the position of debtors relative to creditors and basically means that debtors are only liable to pay back what the market value of the collateral is rather than the actual loan. Hungarian retail sales dropped by 4.8%/y in June. Overall, the numbers further confirms that domestic demand remains very weak in Hungary and with the recent weakening of the Hungarian forint and general increase in investor concern about the Hungarian economy; we have a difficult time seeing any real rebound in retail sales in the near future. Turkish manufacturing confidence increased to 112.7 in July from 111.7 in June – further confirming that the recovery in the Turkish manufacturing sector continues.

 

	Todays report was brought to you by     Ashley Ingle

		GBP-EUR		1.2003
		GBP-USD		1.54914
		GBP-AED		5.69
		GBP-JPY		134.999
		GBP-CAD		1.60442
		GBP-CHF		1.62975
		GBP-HUF		344.32
		GBP-TRY		2.3565
		GBP-AUD		1.72515
		GBP-ZAR		11.4559
		GBP-NZD		2.1219

		GBP-PLN		5.8563
		GBP-HKD		11.0281
		GBP-THB		49.8
		EUR-GBP		0.8328
		EUR-USD		1.29019
		EUR-AED		4.7365
		EUR-TRY		1.9626
		EUR-AUD		1.43732
		USD-CAD		1.0359
		USD-JPY		87.15

Main News Daily Update

 

In United Kingdom, according to its preliminary estimate, activity was up markedly in Q2 2010, +1.1% q/q after +0.3% q/q in Q1 2010. The recovery in output was marked across the board. In the manufacturing sector, output was up by +1.6% q/q. In the services, activity was up by 0.9% q/q. Output jumped in construction (+6.6% q/q). Conversely it was up modestly in agriculture (+0.3%) and decreased in mining (-0.8% q/q). Overall, given the expected deceleration in activity in the second half of this year, GDP growth should be around 2% in 2010, before decelerating further next year.

 

In France, Household spending on manufactured goods down by 0.9% q/q in Q2. Real household spending on manufactured goods was down by 1.4% m/m in June, after a rebound recorded in May. There were two main reasons for this sharp decline. First, household durables sales, and in particular TV sales, fell back after the boom recorded ahead of the football world cup. Electronic equipment sales were down by 3.7% m/m after +12.4% m/m in May. Second, clothes and leather sales were down, for the third consecutive month. The sharp drop recorded in June (-5.0% m/m) was partly due to the sale season calendar, and some rebound is likely in July. Car sales stabilized in June for the second month in a row (0% m/m after -0.3% m/m in May). They were however down by 8.4% q/q on average in Q2 2010 (after -11.1% q/q in Q1) and have fallen below their average level in 2008. All in all, real spending on manufactured goods was down by 0.9% q/q in Q2, after -1.9% q/q in Q1 2010. This decline was largely due to the correction in car sales, while other sales remained weak in recent months, with the exception of electronic equipment sales. Total household consumption (goods and services) is likely to have remained nearly flat in Q2 2010. In Germany, Strong increase of the Ifo Business Climate index in July (106.2). The first data for the third quarter of the year reported that Germany is still in a very good shape. The Ifo’s “headline” business climate index rose to 106.2 in July, the highest level in three years. GDP likely increased by around 1.5% q/q in Q2 2010. Today’s data signal that activity is still expanding at a rapid pace. However, the pace of economic activity is likely to moderate throughout the second half of the year. External demand, the main engine of German economy is losing momentum and domestic demand is unlikely to compensate the slowdown of external demand.

 

The data calendar is rather thin today. Data is expected to show that new home sales in the US picked up in June after a sharp drop in May. No large companies report Q2 earnings today.

 

Only 7 of 91 banks failed the European stress tests published by the Committee of the European Banking Supervisors (CEBS) on Friday. While it put into question the severity of the stress test it is close to markets expectations based on what has been leaked from the National Supervisors in recent weeks. The amount of disclosure was the positive surprise. Most banks except a few German banks have released detailed information about their sovereign debt exposure. This might aid further in the market to a larger degree starting to differentiate risks between banks. However, we do not expect the stress to be the big game changer in Europe. With the apparent weakness of the stress tests, financial markets has probably not yet been convinced that European bank as a whole have sufficient capitalisation. In Europe the confidence in the banking sector and confidence in the sustainability of public finances are highly interwoven and it that sense restoration of confidence in particularly peripheral countries will still be dependent on Europe’s ability to convince the market, that a sovereign default is unlikely to happen. Market reaction in U.S. trade Friday evening was slightly positive after some initial jitters. EUR strengthened slightly and European banks traded in the US ADR market gained modestly. As a direct consequence of the release of the stress test the Bund future lost around 30cents (around 3-4bp in 10y yields). On balance we regard the stress test as slightly positive, but a significant near-term reduction in the risk premium levied on the single currency appears unlikely. The market impact could be slightly positive for risky assets including peripherals government bonds.

 

A couple of Polish numbers were released on Friday. Retail sales surprised on the upside, growing 6.4% y/y in June compared with the consensus expectation of 4.1% y/y. Unemployment dropped a bit in June to 11.6% from 11.9% in May. Both numbers confirm that the recovery in the Polish economy continues and that rate hikes have moved closer. Friday brought more bad news regarding the situation in Hungary as the two rating agencies Moody’s and Standard & Poor’s both came out with warnings that they could downgrade Hungary’s credit rating on the back of the breakdown of talks between the Hungarian government and EU/IMF. Unfortunately, the Hungarian government once again demonstrated that it does not seem to take the concerns of investors, lenders and rating agencies seriously as Economics Minister Gyorgy Matolcsy said that the rating agencies “don’t understand” that fiscal responsibility needn’t come at the expense of independent economic policy. Telling rating agencies that they don’t understand is not going to do much for the credibility of economic policy in Hungary. Not much on the agenda today in the region other than Hungarian retail sales. Danske expect the Hungarian retail sales numbers to confirm that the Hungarian economy and domestic demand in particular continues to be very weak.

 

	Todays report was brought to you by     Ashley Ingle

		GBP-EUR		1.1914
		GBP-USD		1.5422
		GBP-AED		5.66
		GBP-JPY		134.22
		GBP-CAD		1.6004
		GBP-CHF		1.6070
		GBP-HUF		339.08
		GBP-TRY		2.3417
		GBP-AUD		1.7235
		GBP-ZAR		11.432
		GBP-NZD		2.1262

		GBP-PLN		4.8459
		GBP-HKD		11.975
		GBP-THB		49.849
		EUR-GBP		0.8396
		EUR-USD		1.2935
		EUR-AED		4.7052
		EUR-TRY		1.966
		EUR-AUD		1.4472
		USD-CAD		1.0389
		USD-JPY		87.105

Main News Daily Update

 

The British pound was generally caught up in the bearing and intensity of risk appetite trends, with little attention paid to the second tier retail sales report for June (which consequently booked a stronger-than-expected 1.0 percent climb). For the final session of the week, responsibility for price action will be shared a little more evenly. A positive outcome for European financials will bode well for the UK. At the same time, the UK’s own 2Q GDP reading will be an integral update for the sterling itself and act as a proxy for growth in the industrialized world. Preliminary UK Gross Domestic Product figures are set to show the economy picked up momentum in momentum in the second quarter, adding 0.6 percent in the three months through June. The annual growth rate is expected to tick higher to 1.1 percent, the first positive reading in two years and the highest since the first quarter of 2008. However, the operative question at present is how much the economy will slow as the government implements its ambitious “emergency” budget plan – a scheme designed to trim the deficit by a whopping 6.3 percent of GDP in 2014-15. This means the market will likely wait for the more detailed second revision of second-quarter figures that will offer a breakdown of the sources of growth to really size up the result, with traders most concerned with the economy’s ability to avoid renewed recession as fiscal stimulus is withdrawn.

 

We are coming down to the wire. The European Union is scheduled to publish the results of its Stress Test to a very eager market at 12:00 GMT. This is strategic timing for policy officials as it would be after the official close of European banks and is generally a period where liquidity is winding down for the weekend. For the markets, this will mean a dampened reaction to any surprises and a longer period for reflection. This is preferable from their perspective as it will cut down on immediate panics or euphorias. That being said, there is no way to curb the market’s interpretation altogether; and price action will roll over to Monday just as surely as it would erupt on Friday should it be a remarkable outcome. From the report, Bloomberg News has quoted a document from the CEBS whereby the group is working on three scenarios – one in which a “sovereign shock” would lead to the default of smaller private firms but not an actual nation. Traders will have to judge whether this assessment is transparent and critical enough of future circumstances to be considered useful. If it isn’t, the outcome could be as bad as a round of failures. Germany’s IFO Survey of business confidence is expected to show firms’ economic expectations deteriorated for the third consecutive month in July amid concerns about a lurch toward fiscal austerity and rising long-term borrowing costs as governments work to unwind massive public deficits. However, an upside surprise is not out of the question after preliminary PMI figures surprised broadly to the upside for the same period.

 

The dollar suffered its worst stumble in a week as risk appetite surged. What is important now is determining whether this particular move should be adopted into speculative expectations and trade decisions, or whether this is a market abnormality that has developed because of the distortion characterized by forthcoming event risk. Should we defer to the first assessment, the sharp advance in growth and yield-sensitive assets almost fully offsets the cumulative losses of the week and suggests a continuation of a dominant trend. Alternatively, should the session’s volatility and direction boil down to a side effect of the looming event risk of the coming 24 hours; today’s activity could be a throwaway because the reaction to the EU Stress Test could produce dramatically different outcomes. That being said, today’s activity will have a permanent effect on price action to some extent. With today’s activity, a few critical pairs have seen a significantly relief in speculative pressure. Among the most notable developments: EURUSD has pulled back into congestion rather than keeping the world’s most liquid pair on the cusp of a larger retracement of its two-month rally. Looking for the source of today’s rally, sentiment itself did not have a particular catalyst with which to run with. In fact, the general cut of the scheduled and unscheduled event risk would be considered a weight on the outlook under normal circumstances. For a global assessment of economic activity and market health: Japanese officials repeated concern over the volatility in exchange rates and the implications it has on vital trade; the IMF warned that the Euro-area economy would slow substantially over the next few years and listed significant steps that must be taken to promote stability; the BoE’s chief economists warned that the UK economy would suffer for its fiscal responsibility; and Fed Chairman Ben Bernanke maintained his outlook for uncertainty under the context of potential global troubles and domestic struggles with economic stimulation. And, for those that would point to the earnings data for the day as a definitive contribution to optimism, the figures were positive; but accounting for yesterday’s financial firms is arguably more important yet it ultimately contributed little to price action. Having even less impact on investor confidence considering its outcome (though conforms to the dollar’s performance) was the day’s US data. While it may not be good for short-term volatility, the data is nonetheless an important assessment of medium-term economic performance. Confirming that housing is a considerable burden on the recovery and will continue to be, existing home sales dropped another 5.1 percent and inventory rose to a 10-month high. For a broader assessment of growth, the Leading Indicators composite fell for the second time in 15 months.

 

	Todays report was brought to you by     Ashley Ingle

		GBP-EUR		1.1895
		GBP-USD		1.52641
		GBP-AED		5.607
		GBP-JPY		132.248
		GBP-CAD		1.58951
		GBP-CHF		1.59008
		GBP-HUF		337.55
		GBP-TRY		2.3248
		GBP-AUD		1.72534
		GBP-ZAR		11.5151
		GBP-NZD		2.1239

		GBP-PLN		4.8739
		GBP-HKD		11.8691
		GBP-THB		49.2
		EUR-GBP		0.8404
		EUR-USD		1.2831
		EUR-AED		4.7098
		EUR-TRY		1.9543
		EUR-AUD		1.4509
		USD-CAD		1.0414
		USD-JPY		86.63