Market movers today
• Focus on US figures with both Empire manufacturing and June retail sales out. Following the latest improvement in the US job market there is a chance that retail sales turned out decently in June, which could return focus to the fact that Fed tapering is pending and thus could lead Treasuries to erase some of the gains seen after the FOMC minutes and Bernanke’s dovish comments last week. Notably the Fed chairman delivers his semi-annual testimony to the Congress later this week.
• While waiting for the US numbers, markets will be digesting the Chinese data for hints as to what sort of landing the China’s economy is in for: we have become much less optimistic on China recently due to the authorities’ higher tolerance for weaker growth. Markets will be alert to any hints as to what would trigger stimulus.
• We will send out updated FX forecasts today. Following the discrepancies regarding where forward guidance leaves monetary policy in the US vs the UK and the euro area we maintain our call that both GBP and EUR should weaken against USD; we have pencilled in further downside in the former two as we expect the ECB and the Bank of England to lag the Fed significantly. Same goes for JPY and Bank of Japan. Indeed, the broad-based USD rebound is here to stay in our view.
Read the full report: FX Daily
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