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FX News Today

European Outlook: Asian stock markets are mixed, with Japan outperforming in catch up trade, after yesterday’s holiday. Other markets are left pondering the global outlook and with oil prices also slightly down and the front end WTI future hovering around 45 USD per barrel, markets remain cautious and U.S. and U.K. stock futures are heading south. The European calendar brings the first major post-Brexit survey in the form of German ZEW investor confidence, which we expect to fall back sharply. The U.K. has inflation data for June and the ECB publishes the bank lending survey.

RBA Meeting Minutes: There is a possibility of a further rate cut at the August meetingEmployment growth has “moderated” with further slack in the labour market.  Housing market very mixed and good growth in non-mining business. However, inflation remains a problem as expectations “remained below average”.  The AUDUSD slipped to 0. 7508 and currently trades at 0.7520.  

US Market Reports: Led by tech, U.S. equities caught a shallow bid before stalling out again, after the $32 bln ARM-Softbank merger caught Wall Street’s attention. The NASDAQ Comp is clearly pacing the move with a gain near 0.6%, followed by the S&P 500 at +0.2% and the Dow largely flat. European equities remained mixed with the Euro Stoxx 50 down 0.3% and the UK FTSE 100 0.4% higher. Within the Dow, Goldman +1.3%, Apple +1.2%, and Microsoft +0.9% were among leaders, while Caterpillar -1.2%, and Merck -0.9% among the deepest decliners. The VIX equity volatility index is essentially flat near 12.70, loitering in a tight 12.59-13.12 session range ahead of year-lows of 10.88. Risk of politics and activism colliding at the RNC convention may keep investors somewhat cautious for now.

US NAHB The homebuilder sentiment index fell 1 point to 59 in July after rising 2 points to 60 in June (which was a 5 month high). The July reading is slightly above the 58 average for 2016. Declines were across the board. The current single family sales index slipped 1 point too to 63, reversing the 1 point increase to 64 previously. The future sales index dropped back 3 points to 66 after surging 4 points to 69 last month (revised from 70). The index of prospective buyer traffic dipped 1 point to 45 following a 2 point rise to 46 (revised from 47). The data are in line with expectations and won’t have much impact on lethargic markets.


Main Macro Events Today        

  • German ZEW  Today’s German ZEW investor confidence reading will be the first major post-Brexit survey and we expect the U.K.’s referendum result, which wrong-footed markets, to drop sharply, with negative effects on confidence dampened only by hopes of ongoing or further stimulus measures by central banks. We are looking for a drop in the ZEW to 11 from 19.2 in June and the risk is to the downside, as a positive number still means that optimists outnumber pessimists. The referendum may not have proved to be the Lehman moment for financial markets many feared, but growth forecasts are being revised down across the board and sentiment will be hit by the uncertainty that is likely to characterise the future relationship between the U.K. and the EU for some years to come.
  •  US Housing Starts  June housing starts data is out today and should reveal a 0.5% headline increase to a 1,170k (median 1,168k) pace from 1,164k in May. Permits are seen at 1,155k from 1,136k in May and completions should be 1,010k in June from 1,020k in May. The NAHB was firm in June so there is some upside risk to the release.

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Stuart Cowell

Market Analyst


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