Daily forex news

Forex - No Shift in Trading Themes.....Yet

Forex News and Events:

As the week comes to a close, we have yet to see any definitive signs that markets have shifted from a risk appetite to a growth differential theme. In fact, the thin evidence available this week, the market’s reaction to economic data and fx correlation to equity and yield changes, points to a world unchanged from pre-NFP. However, the positive economic data from the Eurozone and disappointing data from the US tempered investor’s optimism around the USD. Yesterday, both Germany and France surprised to the upside and registered 0.3% q/q for preliminary Q2 GDP.

In addition, French and German GDP releases imply that household consumption is holding up, while exports also recovered from their lows in the last two Qs. This set the stage for a better than expected Flash Eurozone Q2 GDP, which printed at -0.1% q/q vs -0.5 % q/q decline. While pundits hailed the end of the European recession, we are still looking at that massive contraction and are disturbed that at this rate it will take years to return to pre-crisis levels.

And later that day, on the other side of the pond, US retail sales dropped, despite the success of the “cash for clunkers” auto sales program. Nominal retail sales fell 0.1% vs. +0.8%, while ex autos sales were even weaker at -0.6% vs. 0.1%. In addition, initial jobless claims rose slightly to 558k. While still at an elevated level, the 4-week average is trending lower. The FX majors are stuck in unexciting ranges during Asian trading, with EURUSD trading between 1.4255-1.4305 and the USDJPY between 95.05-95.50.

The commodity bloc continues to perform well, as RBA Governor Stevens delivered his semi-annual testimony to Parliament, which had a clear tone of cautious optimism regarding the domestic economy. In New Zealand, after six consecutive quarterly declines, retail sales came in 0.1% m/m higher for June vs. -0.3% exp. Today, the important news would be the CPI reading from the Euro Zone and the US, which could prove decisive over the status of the stimulus packages and whether the central banks would review the QE program in their next meetings. Also released would the University of Michigan Consumer Confidence, which could help determine the status of the consumer mentality over their outlook of the economy as job cuts continue to rise despite recovery measures.