After last night’s explosive EUR rally, Asia saw a mild correction in subdued activity but the single currency appeared to find support on the dips, at least in the near-term.
ECB chief Draghi had lit the fire under the EUR overnight following comments that the ECB would do whatever it takes to preserve the EUR. EURUSD saw a hefty short squeeze, rising through a number of key resistance points along the way to touch a 2-week high. Focus will now no doubt switch to next week’s ECB meeting to see if he follows up the words with actions (eg. re-introduction of SMP, relaxing collateral eligibility for peripheral bonds, more LTRO, rate cuts etc.).
Data releases during the Asian session were Japan-centric with inflation data highlighting the difficulty the BOJ is having in getting anywhere close to its desired 1 percent medium-term target. Headline national CPI in June fell 0.2 percent y/y, below the flat reading expected and +0.2 percent in May, while core readings fell an even steeper 0.6 percent y/y. Deflation still remains a threat to the beleaguered Japanese economy and sluggish demand is not helping.
This sluggish demand was highlighted in the retail sales data which showed a 1.2 percent decline in June sales compared to a month ago. Large retailers’ sales fell a steeper 2.6 percent y/y, the third month of declines in a row. Pressure is certainly increasing on the BOJ to do more to stimulate the economy with additional QE measures the favoured (only?) option. The next BOJ meeting is not until August 9 but the JPY did seem to have a softer feel to it during today’s Asian session.
US data releases overnight saw jobless claims easing back to 353k from a revised 388k last week (though comments suggest car plant re-tooling continues to distort the numbers) while durable goods orders saw a hefty increase on the headline, rising 1.6 percent m/m, but once huge aircraft orders were taken out of the equation it was a measly -1.1 percent and non-defense orders were a deeper -1.4 percent. The weekly Bloomberg consumer confidence index continues to slide off recent peaks, hitting -38.5 while once again the supposed rebound in the US housing market was questioned with pending home sales falling 1.4 percent from a month ago.
Data Highlights
US Jun. Durable Goods Orders out at +1.6% m/m vs. 0.3% expected and revised 1.6% prior
US Jun. Durable Goods Orders Ex-Transportation out at -1.1% m/m vs. 0.1% expected and revised 0.8% prior
US Initial Jobless Claims out at 353k vs. 380k expected and revised 388k prior
US Continuing Claims out at 3287k vs. 3300k expected and revised 3317k prior
US Bloomberg Consumer Comfort Index out at -38.5 vs. -37.9 prior
US Jun. Pending Home Sales out at -1.4% m/m, +8.4% y/y vs. 0.3%/12.1% expected and revised 5.4%/14.7% prior resp.
US Jul. Kansas City Fed Index out at +5 vs. +4 expected and +3 prior
JP Jun. CPI out at -0.2% y/y vs. flat expected and +0.2% prior
JP Jul. Tokyo CPI out at -0.8% y/y vs. -0.6% expected and -0.6% prior
JP Jun. Retail Trade out at +0.2% y/y vs. 1.1% expected and 3.6% prior
JP Jun. Lge Retailers’ Sales out at -2.6% y/y vs. -1.6% expected and revised -0.8% prior resp.
China Jun. Industrial Profits YTD out at -2.2% vs. -2.4% prior
Upcoming Economic Calendar Highlights
(All Times GMT)
Swiss KOF Leading Indicator (0700)
Sweden Retail Sales (0730)
GE CPI (1200)
US Q2 GDP (1230)
US Michigan Confidence (1355)
Andrew Robinson,
SAXO BANK