The EURUSD pair continued to hold on to trading above the 1.31 region during the US trading session. The effect of the ECB’s announcement for the unlimited bond purchase program seems to be wearing off with bond yields on Spain and Italy’s 10 year yields were seen to be slowly moving higher again.
The much debated EU banking union could likely be delayed as German Chancellor, Angela Merkel commenting that it would be an oversight if the reforms were in place by January 2013 and noted that credible steps should be taken rather than having to act quickly.
The Eurozone’s trade surplus data was released yesterday which showed a 15.6 billion surplus, from June’s data of 13.6 billion. However, the exports sector showed declines for the second month in a row with analysts expecting the region to drag the activity in the third quarter as well. Exports dropped by 2% in a seasonally adjusted month on month data in July compared to a 2.4% increase in June. Imports also dropped 1.2% after June’s increase of 0.7%,
The trade surplus data could very well affect the region’s GDP which could contract even further in the third quarter of the year, having contracted by 0.2% in the second quarter.
In today’s economic calendar, the German ZEW economic sentiment for September will be released with a recovery on the cards. The German economic sentiment out today will be the first time since the ECB’s announcement of the bond purchase program. Analysts expect the number to improve from 25.5 to -19 or -20.
London FTSE Snapshot
The FTSE100 closed 0.37% lower at 5893.52 and is likely to open this morning’s session 3 to 8 points lower than yesterday’s close. Today’s economic data from the UK will see the Consumer Price Index, Retail price Index.
The UK inflationary pressure for August is likely to fall on account of the discounts offered by retailers to offset a drop in trade on account of the Oympic games. Analysts expect the UK CPI inflation to be out in the range of 2.5% – 2.6% while the month on month could possible show an increase of 0.5%, translating to a 3.1% increase for the year.
Earlier in July, inflation spiked surprising the UK economy and catching the BoE unawares. The MPC has been impressing upon the markets that the drop in inflation is sustainable, maintaining a 2% target inflation rate.
The GBPUSD had earlier touched this year’s high at 1.6305 which is likely to be a key level with a resistance line forming at 1.6590 which happens to be last year’s high in August. There is a possibility for the GBPUSD to drop back to 1.6050
Market News – Asia
Markets across Asia were mixed after some consolidation saw the stocks moving higher. Risk assets were seen to be pulling back after what followed a rally during last week with concerns weighing in around Europe. From the equity markets, the Hang Seng was up by 0.01%, the ASX200 was down by 0.14%, while the Nikkei was down 0.16%. The USDJPY pair managed to move a bit stronger, coming ahead of the Bank of Japan’s two day monetary policy meeting that began today. The Asian markets could very well be dragged down by the ongoing dispute between Japan and China in regards to laying claims for the disputed islands.
RBA Minutes meeting revealed that the Australian economy was growing at a trend with the members noting a sharp decline in commodity prices but the current measures taken by the RBA seem to be successful in boosting the economy. RBA left interest rates unchanged at 3.5% for the third consecutive month. The Australian Dollar dropped 0.1% against the USD
Market News – US
In the US trading session, the New York Manufacturing Index data showed a deteriorating rate of decline in September. The report was released by the Federal Reserve bank of New York noting that the index of activity dropped to its lowest levels in over three years coming out at -10.41 in September, compared to August’s -5.85 on the index, clearly marking a contraction in the region’s manufacturing activity.
US equity indices closed lower across the board, with the Dow Jones Industrials closing 0.03% lower while the Nasdaq was down by 0.17% and the S&P500 was down 0.31%.