EUR/USD (1.4405) The US durable goods data yesterday surprised the markets by coming in at 4 percent, twice as high as analysts had expected. However the good news was lodged mainly in the nondefence aircraft orders; without that component the core non-defence capital goods fell by 1.5 percent. Therefore, whether this data release was responsible is questionable, but market participants scaled back their expectations for QE3 remarkably yesterday. As currency traders changed their views on any hint of monetary easing from Jackson Hole tomorrow, analysts suspect the effect on the US dollar could be positive. Meanwhile in the eurozone, Christian Wulff told a group at the Lindau Nobel Laureate Meetings that the sizeable purchase of individual states’ bonds by the ECB is legally questionable. Politicians generally reserves judgement on the eurozone’s independent central bank, but it appears that the German president wanted to give voice to those who are concerned that Germany is taking on funding troubles that other states have incurred. Unfortunately Mr Wulff didn’t propose any solution, like those at Lindau would come to expect. Perhaps Professor Joseph Stiglitz can make up for the omission – by using the forum to talk about a new economic theory that ‘really works’.
The euro remains in a consolidation zone between 1.4110 and 1.4515. The hurdle at 1.4590 serves as the trigger for upside momentum, and meaningful support enters today at 1.4335.
Market Bias Index
The Japanese yen bias continues to shrink, and the mere fact that it’s valuation against the US dollar and the euro doesn’t change allows traders to adapt to these levels.
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Deutsche Bank
Fixed Income Research – Global