Summary
The equity markets fell as investors became cognizant of a potential deflationary and low growth environment in the US. Fed Governor Fisher’s comments that the US needs to bolster their quantitative easing program to avoid a Japan like situation, scared market participants. The S&P 500 Index dropped 5 points to settle at 1102.
Tomorrow's Events
JPY
5:00
Japan Housing Starts
June
1.8%
-4.6%
EUR
9:00
EMU Employment Rate
10%
CAD
12:30
GDP
May
.2%
0
USD
US GDP
Q2
2.5%
2.7%
13:45
US Chicago PMI
July
56
59.1
13:55
US Sentiment
67
76
Trading Opportunities
AUD/NZD
The RBNZ hiked rates 25 basis points to 3% on Wednesday. Despite being only the second hike in the current tightening cycle, the RBNZ statement reflected a dovish note and said that the pace of future hikes may be more moderate than was projected in its June statement. Governor Bollard noted that the outlook for NZ growth has softened somewhat, but that it is still appropriate to remove accommodative policy. He added that future prospects for growth had deteriorated, and that recent NZD gains are inconsistent with this as well as the decline in NZ export prices. The NZD dropped against the AUD and the AUD/NZD seemed to break out of a tight 2 big figure range.
EUR/GBP
Euro zone and UK economic releases were mixed today. Data surprises have swung sharply in favor of the euro and away from the dollar in recent weeks. EMU economic confidence came out at 101.3 compared to the 99.1 expected by economists. Indeed, that has been one of the factors behind the euro’s recovery. Perhaps as the economic surprise factor moves away from favoring the euro, that would also coincide with some eventual topping action for the euro. In the UK, the nationwide housing index decreased by -.5% compared to the -.3%, which was expected by the market. The EUR/GBP held the 50-day moving average on the large up move in the GBP, and should provide strong support for a long Euro position.