Confidence survey to round out of poor US data week
While the media has reacted to Fed President Williams comments overnight (tapering could happen as early as summer if all goes well), US yields continue to remain under pressure while most majors are unchanged. Yes, the commodity bloc has traded to new lows in Asia, but this is linked to China; 7-day money market rates rose sharply (up 73bps on the week) as the PBOC drained liquidity. Williams’ comments aren’t new; he gave the same message last month, and is a non-voter this year. We think Chairman Bernanke’s speeches over the next week will be more important; he speaks at Bard College (Saturday) and gives a Congressional testimony on the economy (Wednesday). Any indication that (a) tapering remains far off and (b) growth is still below where the Fed would like would hurt USD. Today data is limited to May Michigan consumer confidence; our economists expect a modest improvement (77 from 76.4). Next week’s durable goods report (Friday) will be important, with our economists forecasting weaker readings. We remain long EURUSD, targeting a move back to 1.34.
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BNP Paribas