Review: Norwegian retail sales offered a negative surprise, resulting in some selling of NOK over the day.
- LCH Clearinghouse for bonds raised once again the margins on Italian and Spanish government bonds.
The reason for this was that the stronger volatility for bonds increases the probability that the obligations cannot be honoured, but due to the higher margins the probability is again reduced. This is an important signal and therefore we spend some time on it. If LCH continues to increase the margin, the least liquid investors will be pushed away from high-interest papers such as Italy and Spain.
- Rumours in the German media: The social-democratic party in Germany has stated that it opposes further rescue packages for Greece and perhaps Spain. The imbalances in the European core countries are still affecting the financial markets, and statements of this nature add to the pressure on EUR.
- It has just been announced that Germany’s participation in ESM is to be tried at the constitutional court, and this may delay the vote in Germany planned for 12 September.
Today’s macro-economic news: This morning GDP data from both France and Germany were released. Both countries offered a pleasant surprise. EURUSD was affected positively by 25 – 30 pips on this news, which came as a bit of a surprise. Also, today we will see a whole series of GDP data from European countries, and at about 11 a.m. we will have the overall result. Also ZEW will be published, which previously resulted in quite extensive market movements even in the event of minor surprises.
Today the important US retail sales will be published at 1.30 p.m. Jyske Bank’s macro-economists anticipate a moderate increase. If they are proven right, we will see an underlying positive sentiment over the day.
EURUSD (NEUTRAL): Today trading will be affected by the publication of GDP data in the euro zone and retail sales in the US. Generally EURUSD is still trading in a long-term down trend, but currently it is caught in a narrow trading range of 122.50-124.50. A breach above 124.50 will result in pressure towards 125.50 – 127. Trade below 122.5 will increase the probability that we will see a new bottom for EURUSD.
AUDUSD (SELL): We recommend investors to sell AUDUSD with a relatively close stop-loss. AUDUSD offers clear technical signals to sell, which is supported by economic circumstances that also advocate a higher AUD. Investors should note that they are facing a considerable interest rate.
NOKSEK (NEUTRAL): Still very attractive long-term investment (see recommendation).