While the EUR had retreated from its 3-week highs versus the US dollar in the latter stages of Friday’s NY session, it opened a tad higher at today’s Asian open following weekend press reports in Europe.
Euro Group president Jean-Claude Juncker appeared to be on a media blitz across Europe with interviews with a number of European newspapers. The gist of his message was that this is a key week for European policy, saying the Eurozone is at a decisive point and leaders will work with the ECB to demonstrate their commitment to the stability of the single currency and decide what measures to take to tackle record-high Spanish bond yields.
Note that some cold water was poured on the notion that the ECB would be the “savior” of the EUR by the Bundesbank on Friday as chief Weidmann said purchases of bonds by the ECB would set the wrong incentives/precedents and he doubted that such a move would be effective. Watch closely for the scheduled “talks” between ECB’s Draghi and Bundesbank’s Weidmann “in the coming days”. We may get a headline feast!
The early move higher in the EUR only lasted a brief period and EURUSD reverted back to the 1.23 NY closing level and consolidated there for the rest of the session. We did see a dip below 1.23 after wires reported Moody’s saying in its weekly credit report that the ECB alone cannot solve the European debt crisis.
On the data front, Japanese industrial production remained soft in June. Preliminary data showed the third month of contraction in a row with a decline of 0.1 percent m/m following a 3.4 percent decline in May. Expectations were for a healthy 1.5 percent rebound. The softer data prompted Japan’s Ministry of Economy, Trade and Industry to downgrade its assessment on output, shifting it to a flat trend from an improving one.
Friday’s session saw the EUR extend its Thursday gains, rising to 3-week highs just shy of 1.24 versus the US dollar following ECB chief Draghi’s comments. However, the above-mentioned Bundesbank comments saw the pair easing off the highs into the close.
US Q2 GDP was marginally above forecast, coming in at +1.5 percent q/q versus 1.4 percent expected, with a 0.1 percent upward revision to the previous data adding to the positives. Final Michigan confidence numbers for July were also marginally higher at 72.3 from 72.0. Wall Street rallied strongly into the end of the week with the S&P closing at its highest since May 3 as European hopes took hold.
Data Highlights
US Q2 GDP out at +1.5% q/q vs. 1.4% expected and revised 2.0% prior
US Q2 Personal Consumption out at +1.5% vs. 1.3% expected and revised 2.4% prior
US Jul. Final Michigan Confidence out at 72.3 vs. 72.0 expected and 72.0 prior
NZ Jun. Building Permits out at +5.7% m/m vs. 7.3% expected and revised -7.2% prior
UK Jul. Lloyds Business barometer out at -8 vs. -12 prior
UK Jul. Hometrack Housing Survey out at -0.1% m/m, -0.5% y/y vs. flat/-0.5% prior resp.
JP Jun. Industrial Production out at -0.1% m/m, -2.0% y/y vs. 1.5%/-0.1% expected and -3.4%/6.0% prior resp.
AU Jun. HIA New Home Sales out at +2.8% m/m vs. 0.7% prior
Upcoming Economic Calendar Highlights
(All Times GMT)
Sweden Q2 GDP (0730)
UK Net Consumer Credit (0830)
UK Mortgage Approvals (0830)
UK M4 Money Supply (0830)
EU Business Climate Indicator (0900)
EU Euro-zone Confidence Indicators (0900)
UK CBI Reported Sales (1000)
US Dallas Fed Manufacturing Activity (1430)
Andrew Robinson,
SAXO BANK