FX & Money Markets Daily: Markets Slid Along With US Home Sales

Daily Forex Fundamentals | Written by Jyske Bank | Jul 25 08 06:15 GMT |

Today's Comment Majors & Scandies Yesterday US stock markets and financial shares in particular dropped as data showed that sales of existing homes in the US dropped more than forecast in June thus hitting a 10- year low. The poor sentiment rubbed off on markets in Asia where the major stock indices are all posting losses this morning. Thus it looks like European markets will be off to a bad start ahead of the weekend. The USD has gained a bit of foothold in the past couple of days as the Q2 earnings announcements from the large US banks have turned out to be less gloomy than feared and investors have regained a bit of risk appetite. Thus focus has turned towards the EUR which in the light of economic fundamentals seems overvalued. Yesterday the Eurpoean currency dropped versus USD as the German IFO index was released. The index fell from 101.2 in June to 97.5 this month whereas analysts had expected a more modest drop to 100.1. Thus it seems that the downturn in the global economy has started in earnest to spread to Germany. Although the EUR has recovered somewhat from yesterday's lows versus USD, the move was just enough to trigger stop loss on our buying recommendation on EURUSD. Technically speaking the currency cross seems supported around the 100-day moving average (currently at 156.53). However for the time being we prefer to obtain a neutral stance. USDCAD has risen somewhat in the past two weeks as the USD has regained a bit of the territory lost and the CAD has weakened in the wake of falling oil prices. Currently USDCAD is testing the upper boundary of a falling trend channel and as technical indicators suggest that momentum on the upward move is wearing off we have chosen to stay neutral and adjust our interval on the currency cross slightly. Emerging Markets Most EM currencies ended the day with small gains. Central- and Eastern European currencies recovered some of the lost territory as markets seem to be shifting focus away from Czech central banker Tuma's comments. ISK lost 1.4 % and we hold on to our long EURISK position but chose to lock in more profit and adjust the stop to 125. Today offers CPI from Iceland where large deviations on the upside from the 13.2 % y/y consensus estimate will add fuel to expectations of further hikes in the key rate, whereas a small surprise on the downside could bring cuts in the key rate closer. For now focus on Iceland is on the financial sector where earnings reports are due during next week. Disappointing numbers will leave ISK very vulnerable. Tonight the Colombian central bank, BanRep, announces its key rate. We expect the rate to be left on hold at 9.75 %, but it is a close call with market participants split between rates being left on hold and a 25 bps hike. Today's key events 09:30 Trade balance (SEK) 10:00 Euro Zone M3 (EUR) 10:30 GDP, preliminary (GBP) 11:00 Consumer prices (ISK) 14:30 Durable goods orders (USD) 16:00 Michigan consumer confidence, revised (USD) 16:00 New home sales (USD) Jyske Core Positions - Recommendations Jyske Markets - FX Research http://www.jyskebank.dk/finansnyt The analysis is based on information which Jyske Bank finds reliable, but Jyske Bank does not assume any responsibility for the correctness of the material nor for transactions made on the basis of the information or the estimates of the analysis. The estimates and recommendation of the analysis may be changed without notice. The analysis is for personal use of Jyske Bank's customers and may not be copied.