Spanish Auction Due
AUDUSD nudged modestly higher overnight, largely on the back of some respectable Q2 earnings reports which helped to boost US equities. An unsubstantiated newswire headline supplied some further momentum claiming that a reserve manager intends to diversify into Australian assets in Q3. The euro too managed to regain its composure shrugging off yesterday’s pair of euro-negative headlines. Germany’s Chancellor Merkel’s reportedly said that “we haven’t yet shaped the European project in a way that we can be sure that everything will work”. Former ECB member Juergen Stark subsequently asserted that weaker states should leave the Eurozone. As expected, Fed Chairman Bernanke’s appearance in front of the House Financial Services Committee did not produce any fresh insights, as the prepared testimony was virtually identical to that delivered to the Senate Banking Committee on Tuesday, while the Q&A session did not uncover anything to suggest further easing is imminent. Again, we believe the Fed will stay in wait-and-see mode for now amid the high degree of uncertainty in the global equation. The June decision to extend the Twist programme through year end will buy time for the Fed, putting the onus on the upcoming Jackson Hole conference on August 31 ahead of the September 12-13 FOMC meeting. Yesterday’s US data had little impact, though the rise in housing starts to 760k in June from 711k in May comfortably beat expectations. The Canadian dollar is sporting a firmer profile, in the wake of Bank of Canada’s Monetary Policy Report and Governor Carney’s remarks which underlined the bank’s hawkish bias. An auction of Spanish sovereign debt at approximately 0830 GMT is likely to be a key focus in Europe today, given the otherwise light data calendar.
Click here to read the full report: UBS Morning Adviser Europe
UBS Investment Bank