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Fundamental Weekly Report

Mixed data slows market enthusiasm

Fri, Jul 30 2010, 18:26 GMT
by Triffany Hammond

TrifFX  |  View company's profile

Fundamental Report for the Week of July 26, 2010

Monday, July 26, 2010

The slow news day coupled with a luke warm response to last week’s Euro-bank stress tests has added up to a fairly quiet foreign exchange market.

The Euro was able to pop up to previous resistance at 1.30 indicating a glimmer of hope by the market makers that the gist of the stress tests will be enough to bring about overall confidence, but stalled there on a sort of re-evaluation phase of the market.

The United States and Euro-Zone have seemed to have barely missed the worst case scenario of a double dip recession that was predicted. However, with growth estimates of 4.7% being missed (current growth estimates are between 3.25% and 3.5%) neither is really out of the woods yet.

That kind of ambiguity, combined with China’s slowing growth, could go a long way toward further stalling the market.

That stall has been a part of every major pair today, even showing signs of confusion in the risk pairs, specifically the EURJPY and GBPJPY, as the market seems unsure of itself right now.

Tuesday, July 27, 2010

Not a whole lot to move the market today as far economic reports are concerned.

The Euro popped up past the 1.3 mark in late Euro/early NY hours as the overlap showed evidence in both the U.S. and European bond market that confidence has been restored after last week’s stress tests proved solvency for European banks.

The only other report I was watching, as 1 of 6 reports that act as a precursor to US Gross Domestic Product (GDP) was the Richmond Fed Manufacturing Survey for July which fell from 23 to 16. This marks the 3rd month in a row this survey has been in decline.

While there isn’t a whole lot of news to go on in terms of identifying the next wave of confidence or fear it seems to be the calm before the storm as the focus remains on increased confidence while we face decreased growth in the major players in the global economy.

Wednesday, July 28, 2010

The market it hinting at a turnaround by showing some JPY strength on a poor showing in the equities market today.

The GBP/JPY and the EUR/JPY both saw dips as the market’s appetite for risk took a hit on bad USD Durable Goods news. A report like that doesn’t do a lot in and of itself, but it can be a seen as a red flag for GDP and employment – the effects can even stretch as far as wholesale and retail sales. So having the surprise to the downside (the market expected a climb to .9% and instead saw a dip to -.1%) can be a larger warning sign to the market as a whole.

The Kiwi saw some good movement, though not in its own favor, on poor Trade Balance news as it plummeted a whopping $538 Million in June. Terrible news for such an export driven economy and at a terrible time for the currency as the pressure to increase rates stays in place for New Zealand.

Thursday, July 29, 2010

A dip in Germany’s unemployment rate and a bump to the Euro-Zone’s confidence numbers (Economic, Services and Industrial were all in agreement) helped the Euro pop up to 1.31 today where it stalled during the NY Session as US stocks are in decline for the 3rd day in a row.

The GBP seemed aided by the good news of its sister economy and experienced a slight increase as well. However equities news quelled any excitement for the USD selloff kept even the commodity currencies range-bound throughout the NY Session.

The JPY was the exception as a loss of risk appetite caused the Yen to strengthened handily against the US dollar.

Overall the tide seems to be turning as risk aversion sets in on overall growth slowdown and concerns that there may not be enough good news to fuel the next leg of recovery around the world. Friday’s US GDP and next week’s NFP is likely to be more cause for concern. I’ll be watching for USD and JPY buying opportunities.

Friday, July 30, 2010

Germany’s poor Retail Sales number (from 3% in May to -.9% in June) brought the Euro back to 1.3 very, very quickly. However the news hasn’t done more damage due to the fact that the YoY data has stayed quite strong and actually increased from -2.4% t 3.1%. Retail Sales is a bigger deal during times of recovery than at any other time because it is the biggest indicator the market has that confidence and available means are available to spur further growth.

The CAD showed a very slight increase of .1% in their GDP numbers, but still missed market estimates by the same amount.

With no news to drive it, the GBP stays stable near yesterday’s consolidation area. However it is likely that next week’s PMI numbers could help the Cable pick a direction once and for all. The numbers have stayed fairly steady in the expansionary range of the mid to high 50s. If they can hold there through this difficult mid-year point then it could be indicating a strong GBP through the end of the quarter at least.

The US is taking its lumps with a poor GDP showing this month (from 2.7% to 2.4% and worse than expected by .1%). Interestingly, the QoQ numbers stayed strong with an increase of .7% over the quarter. That’s indicative of the strong early months where production and employment grew and could be an additional indicator that recent numbers are merely a normal pullback. While PMI’s and Manufacturing Indexes aren’t looking strong for July, a turnaround in August and September numbers could fuel the next positive wave for growth and recovery. If there isn’t enough production by the fall, we could see further fleeing from USD as a safe-haven and look to our commodity currencies for more opportunity.

This report was generated before the end of NY Session.

Next Monday:
NZD ANZ Commodity Price
EUR Germany’s Manufacturing PMI
GBP Manufacturing PMI
USD ISM Manufacturing PMI

Next Tuesday:
GBP Construction PMI
EUR EZ PPI
USD Personal Income
USD Personal Spending
USD Factory Orders

Next Wednesday:
EUR Germany’s Services PMI
GBP Services PMI
EUR EZ Retail Sales
NZD Employment

Next Thursday:
EUR Germany Factory Orders
GBP BoE Rate Decision
EUR ECB Rate Decision
USD Employment

Next Friday:
GBP Industrial Production
GBP PPI
EUR Germany’s Industrial Production
CAD Employment
USD NFP
CAD Ivey PMI
USD Consumer Credit

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Published on  Fri, Jul 30 2010, 18:28 GMT