Fundamental Report for the Week of July 4, 2010
Fundamental Report for the Week of July 4, 2010
Monday, July 5, 2010
Predictably, the market was very, very sleepy without US trading floors to infuse volume over the course of the day.
A bright spot for the EuroZone is in the Purchasing Managers Index (PMI) Composite numbers. Despite the volatility in their own economic outlook the number stays steady at 56. Where numbers above 50 indicate expansion, the market should be feeling fairly positive about the Euro’s ability to recover, at least in the mid to short term view.
Britain released a similar report with their Services PMI which pulled back a tad from 55.4 to 54.4. Still expansionary, but coupled with their pullback in last week’s Construction PMI and it could mean trouble for their employment outlook this month.
Asian session news brought good reports from China and Australia as China’s equities market experienced a nice rebound off of recent lows and Australia, while keeping interest rates steady, voiced exuberance over their consumer spending and business investment prospects. This could go a long way toward boosting the AUD and the NZD as global growth slows and commodity prices increase.
Tuesday, July 06, 2010
The Euro was the biggest winner as risk appetite seems to have driven price as a market that seems reluctant to return from the long weekend sells USD into foreign currency across the board.
The US equities rebound amidst a positive outlook for earnings season seems to be primarily responsible for the return of the market’s willingness to invest. The struggle seems to be between the market makers who believe the worst is over and the market makers who believe that there is another hard knock to come. We may see this play out in FX with large, continuing consolidations.
Wednesday, July 7, 2010
Today’s big surprise came in the form of Canada’s Ivey PMI which was expected to increase to 64. Instead it decreased to 58.9. When compared to recent data, however it was due for a pullback and it is the first time this year that the indicator has retracted. It actually seemed to be good news for the Loonie, presumably on the presumption that there is a natural check/balance happening right now in terms of inflation.
A stark decline in German Factory orders (MoM from 2.8% to -.5%, YoY from 29.6% to 24.8%) pulled the Euro back against the USD for small time today but the prevailing willingness to take on risk (mostly due to equities gains in the U.S.) staid any damage done and the Euro recovered nicely through the middle of the NY session.
Market makers are looking for bargains with overall conditions being so oversold across the board. Even the Stoxx 600 basket of equities (which includes Spanish and French equities) has rallied for the second day in a row.
Thursday, July 8, 2010
Interest rates decisions out of England and Europe made for some indecisive trading conditions as the Euro nudged, reluctantly to May 2010’s high after European Central Bank President Jean-Claude Trichet said that the underlying fundamental indicators are “encouraging.”
The Pound stayed within the confines of its range neither disturbed nor bolstered by the Bank of England’s rate discussions. What might have given the GBP reason to celebrate is May’s increased Industrial Production (up to .7% from -.4% (MoM)) and Manufacturing Production (up to .3% from -.4% (MoM)). The pair didn’t rally on this information, but if it is an indicator of positive job growth and improved GDP then it could server to boost the Cable down the road.
New Zealand’s credit card spending stayed stable at .4 indicating a possible tapering off in their next Retail Sales report.
An interesting spot in US news, but not necessarily meaningful on its own is a large decrease in Consumer Credit in May, dropping from $1B in April to -$9.1B. Without seeing US savings numbers it is difficult to tell if this means that consumers are saving, or if they’re simply buying in cash instead of on credit. Either way it seems to point to a smarter consumer overall – but may be a precursor to another chink in the armor of US Retail Sales.
Friday, July 09, 2010
US stocks rose again as faith in the global recovery resurges. Even debt insurance expenses fell to the lowest point 2 months, according to Bloomberg.
Euro pulled back a bit, despite the equities’ reminder of confidence, on news that France and Italy’s Industrial and Manufacturing numbers both took a little hit in May’s numbers. It doesn’t seem significant enough to make the money movers run, but it did seem to be enough to close out EUR longs before close of the Euro session.
More good news out of England as their Producer Prices fell for the first time in 18months. This should result in a dip in Consumer Prices as well and give some inflationary relief to the British economy. If you remember, it was only last month that we started to see a divide as Andrew Sentance became a dissenting voice in terms of interest rate discussions, calling for an increase in rates to defray the effects of inflation. The PPI numbers may server to quell those fears for the time being.
Adding to that overall confidence are the positive employment numbers out of Canada. The CAD strengthened on news that the country has added 93.2K jobs in June, an increase of 68.5K over May’s numbers and 73.2K better than was what expected for this month’s report. Not surprisingly, their employment rate fell from 8.1% to 7.9% as well.
A slight rise in Wholesale Inventories in the U.S. may be indicating that the Consumer Credit dip, noted on Thursday, is due to savings and not spending in cash. Again, good news for the consumer’s long-term financial health, but it could indicate a pause in the U.S. financial recovery.
Overall, the end of the week analysis indicates abating fears and increasing confidence in the global marketplace.
Next Monday:
- GBP GDP
Next Tuesday:
- GBP CPI
- GBP RPI
- EUR Economic Sentiment
- USD Trade Balance
- NZD Retail Sales
Next Wednesday:
- GBP Employment Numbers
- EUR CPI
- EUR Industrial Production
- USD Retail Sales
- USD FOMC
- NZD Retail Sales
Next Thursday:
- USD PPI
- CAD Manufacturing Sales
- USD Empire State Manufacturing Survey
- USD Industrial Production
- USD Philly Fed Manufacturing Survey
- NZD CPI
Next Friday:
- CAD Leading Indicators
- USD CPI
Triffany Hammond helps traders of all levels, gain the tools, resources and guidance necessary to build on their strengths and work around their weaknesses so that they can make the best possible decisions for themselves in the Forex Market. Triffany is a regular speaker and contributor at 
Your Tuesday’s comment really hits the nail on the head for me. I think its a battle between the school of thought who have more of a mid-term view, who tend to look at the production side of the economy coupled with consumer spending which does seemed to have re-settled into a more positive future and which also has produced better job numbers to back up the idea, I think these people are the hungry investors waiting to get back into the carry trade. To possibly the school of thought with a more longer term worry on their minds that the larger picture which involves the central banks and governments haven’t really found a way out of their problems which when they do find a solution its most likely that that solution will involve a knock on effect that will tumble down all the domino’s we’ve managed to put up already … any thoughts ?
That’s exactly what I’m seeing, Aby. You said it very well. I’m not sure what the overall decision will be, but when one is made, I’m sure it will be dramatic and emotional…especially if it occurs to the risk aversion side, but either direction will stun the opposing side I’m sure.