Lousy US auction results keep JPY under pressure. EUR remains a weakling almost across the board, boosting Scandies.


MAJOR HEADLINES – PREVIOUS SESSION

  • New Zealand RBNZ left rates unchanged at 2.50% as expected

  • Japan Jun. Industrial Production rose 2.4% MoM vs. 2.5% expected

  • Australia Jun. Building Approvals rose 9.3% MoM and fell -14.3% YoY vs. +8.0%/-18.2% expected, respectively

  • UK Jul. Nationwide House Prices rose 1.3% MoM vs. 0.2% expected

  • Sweden Jul. Consumer Confidence rose to -3.7 vs. -7.0 expected and -9.0 in Jun.

  • Germany Jul. Unemployment fell -6k vs. +43 expected

  • Germany Jul. Unemployment Rate was steady at 8.3% vs. 8.4% expected

  • Norway Jul. Unemployment Rate out at 3.0% as expected

  • Canada Jun. Industrial Product Price rose 0.7% MoM vs. 0.1% expected and -1.3% in May

  • US Weekly Initial Jobless Claims rose to 584k vs. 575k expected and 559k last week

  • US Weekly Continuing Claims fell to 6197k vs. 6300k expected and 6251k last week


THEMES TO WATCH – UPCOMING SESSION

(All times GMT)

  • UK GfK Consumer Confidence Survey (2301)

  • Japan Nomura/JMMA Manufacturing PMI (2315)

  • Japan Jun. Jobless Rate (2330)

  • Japan Jun. Household Spending (2330)

  • Japan Jul. Tokyo CPI (2330)

  • Japan Jun. National CPI (2330)

  • Japan Jun. Housing Starts (0500)

Market Comments:

New Zealand's RBNZ left rates unchanged as expected, and surprisingly indicated that it was considering further easing of the interest rate going forward as the recovery is contingent on a weaker currency. We were looking for a stronger sign of discomfort from officialdom with the kiwi's strength, and this is most certainly that sign.
In response, the NZD fell broadly, especially against the resurgent Aussie, where the market is trying to look for the first interest rate increase of the G-10 currency central banks. Australia's huge jump in building approvals bolsters this notion.

Equities surged in Asia and Europe ahead of the US open as the risk party in equity-land seems to want to party through the night and even into the next morning. This combined with the ugly US Treasury auction results (yesterday's enormous 5-year auction) are putting new pressure on the JPY. USDJPY is trading at a new 3-week high and challenging its 55-day moving average as this is being written. The same inputs are also pressuring the CHF more convincingly, with EURCHF having a look above 1.5300 for only the third time since the SNB began intervening back in March. This weakness in the lowly CHF and JPY was countered with the usual strong rise in AUD and CAD on such developments. We wonder at the sustainability of the commodity currency rally considering the huge drop in oil prices and signs that gold is tiring once again, but the focus for now remain on risk appetite in the equity market, it seems.

The EUR remains so weak that even very strong German employment numbers couldn't throw it a bone today. The Scandies continue to bask in the general mood of risk willingness combined with isolated EUR weakness. EURSEK is challenging the neckline of an enormous head and shoulders formation soon (the neckline comes in below 10.40), which could open up for a try at the 10.00 level if no new ugly developments spark risk aversion in the coming couple of weeks. Elsewhere in Europe, GBP made a follow-through move stronger against the EUR, CHF, USD and JPY on the latest supportive housing data and the general return in risk appetite.

Remember that tomorrow is the last trading day, as well as the last day, of the month and end-of-month fixing can spark exaggerated moves, especially considering the relatively low liquidity in the market. With all of the huge moves in equity markets this month, we might expect fixing flows to be rather large tomorrow. Tomorrow will also feature the first look at the US GDP numbers for Q2, with a -1.5% reading expected after Q1's abysmal -5.5%. The Fed's Beige Book late yesterday shows the Fed believing that the signs of recession are easing and President Obama was even so bold as to state that the end of the recession is nigh. Let's hope he doesn't come to eat those words.

Chart: EURSEK

The weak EUR and general risk willingness - especially in emerging markets - has allowed the SEK to flourish here.
At present, EURSEK is closing in on the neckline of the huge head and shoulders formation that stretches back to last fall. Today it also touched the 55-week moving averages. Any ability to follow through in the short term will be contingent on currency market conditions persisting.

EURSEK