It was an overall mixed session for the risk trade as better earnings were offset by a rather dovish economic assessment from Fed Chairman Bernanke. The S&P managed to eke out a 0.4% gain after staging a late day rally. Earnings continued to come in better than expected (more below) but Bernanke noted risks to consumer spending and that financial markets remain stressed – providing an antidote to the euphoria. EUR/USD traded in choppy fashion, edging down to a 1.4164 low as stocks came off but eventually recovering in tandem towards a 1.4213 close. Yen managed to strengthen despite the late day rally in risk. USD/JPY fell from an open near 94.30 to a 93.73 close while EUR/JPY sank from 134.00 to the 133.20 level.

Back to earnings, with 17% of S&P 500 companies now reported, EPS are coming in much better than expected overall. Positive surprises account for 78% of all reports while negative surprises are 20% thus far. The rub, however, is that the bottom line looks to have been driven by extensive cost cutting measures (unemployment is not 9.5% by coincidence) – top-line indicators look less impressive. Sales figures have actually missed expectations by a touch. Furthermore, positive and negative surprises in sales are pretty well evenly split – with the former at 51% of reports and the latter at 49%. So while the bottom line looks good, the sustainability of this in the quarters ahead is still an open question. Bottom line, take the bandied about ''better'' earnings reports with a grain of salt for now.

The Bank of Canada had their monetary policy meeting today and the press statement elicited some minor fireworks. The Bank was less aggressive than we had anticipated with regards to mentioning concern about CAD strength. They did note that the currency's strength is ''significantly moderating the pace of overall growth'' but the announced reduction to their asset purchase plan mattered more. USD/CAD managed to squeeze down to a 1.0966 session low following the press release, but found support and plenty of buying interest down there – it was sitting by 1.1030 at the close.

Upcoming Economic Data Releases (Asia Session) prior expected

  • 7/22 1:00 GMT AU  DEWR Skilled Vacancies MoM  JUL  -3.70%  - -
  • 7/22 1:30 GMT AU  Consumer Prices (QoQ)  2Q  0.10%  0.50%
  • 7/22 1:30 GMT AU  Consumer Prices (YoY)  2Q  2.50%  1.50%
  • 7/22 1:30 GMT JN  BOJ Deputy Governor Yamaguchi to Speak in Hakodate City
  • 7/22 2:00 GMT AU  Reserve Bank's Debelle at Mortgage Industry Panel Discussion