All eyes on the EU summit and thematically, nothing really has changed. More position squaring, however, price action has not been enough to alter underlying trends; we remain unchanged in our view to FX and peripheral bond markets. Ahead of the summit, the key points to look out for will be what is said on the ESM about recapitalising banks directly and the removing of seniority with regards to funding. We do expect to see roadmap for fiscal and banking integration but other than that, very little… Should Italian 10yr yields start breaking above 6.34 and Spanish 10yrs break above 7.25, we are likely to see panic trading increasing. We wouldn’t like to underplay this risk; therefore we are still bearish risk and bearish EUR. We like EURAUD lower, 1.2325 fibo level the support, once broken, this cross could head towards 1.2130. EURUSD struggling to break the 21 DMA of 1.2537, we still stay bearish against 1.26 area and we require a break 1.2430 for signal longer term downtrend is resuming – would target 1.19 again. Intraday, it is worth watching USDJPY as 79.30 is proving to be a decent base, expect s/l selling below and could take it down to 78.50 – key support is weekly cloud 78.03. Generally we are still thinking risk is on back foot and USD is to remain supported.
Decent day of data, but as we have seen more and more recently, it is the macro headline news that is likely to drive market sentiment at the moment…
Germany June unemployment numbers expected today at 08:55 – consensus is for a flat print at 6.7%
Euro area consumer and industrial confidence at 9am we are inline with CF expecting a small increase in number
UK Q1 GDP final release due today at 09:30 – we expect a print of -0.3% q/q in line with consensus
UK Q1 current account prints today at 09:30 – we expect a deficit of GBP -8.3 bn vs consensus of -8.9 bn deficit
US Q1 GDP out today at 1:30 – we are expecting annualized GDP growth of 1.9% q/q in line with consensus
Barclays