FX & Money Markets Daily: The USD Jumped On US Consumer Confidence

Daily Forex Fundamentals | Written by Jyske Bank | Jul 30 08 06:07 GMT |

Today's Comment Majors & Scandies Yesterday sentiment in the European trading session was mainly on the negative side and stock markets were in the red most of the day. However as US consumer confidence data showed a slight improvement from last month stock markets in Europe and in the US rallied and the USD rose to a 1-month high versus the EUR. Thus at this point technical analysis suggests that EURUSD is headed for a test of the bottom of the long term trading interval on the currency cross (around 153). However as the remainder of the week offers plenty of opportunity for volatility on the USD (linked to the release of the ISM indices and the non-farm payrolls report among other things) we prefer to maintain a neutral stance on EURUSD for the time being. The AUD dropped overnight as macro economic data showed that building approvals dropped more than expected. Thus AUDUSD broke through the lower boundary of our interval on the currency cross. Short term AUDUSD is likely to find support around the 100-day moving average (currently at 94.47). Thus we prefer to maintain a neutral stance for the time being and have adjusted our interval on the currency cross slightly. With stock markets in Asia all up this morning it looks like market participants can look forward to a somewhat gentle start to the day. However with consumer confidence data from the Euro Zone and ADP employment data from the US in the pipeline later today there is a risk of a rise in volatility. Investors will pay particularly close attention to the ADP employment numbers as it may give a hint regarding developments in the change in nonfarm payrolls Emerging Markets Following positive equity markets and a further decline in the oil price sentiment on EM was rather positive yesterday, and most currencies closed firmer against EUR. ISK was the top performer up 3.9 % as the market was relieved after 2Q earnings announcements from Landsbanki came out fairly sound. Earnings announcements from the Icelandic financial sector continue today with numbers from Straumur. It seems that the market is taking yesterdays' numbers as a sign that other numbers will come out sound as well, but one should remain cautious as the risk of disappointing numbers still persists. ZAR has done pretty well lately on no particular news and gained 3.3 % against EUR yesterday. Hence the currency broke through the lower range of our interval. We adjust the interval and maintain a neutral stance on the currency. We expect the Polish central bank to adopt a wait and see stance and keep rates on hold at 6 % at the meeting today and the market agrees with this view. A hike at this point of time will come as a huge surprise, but looking a bit further ahead most market participants still expect at least a 25 bps hike within the coming months. Today also has June CPIX from South Africa on the agenda which is expected to increase further to 11.3 % y/y. This will support our view that one more hike in the key rate is necessary. Today's key events N/A Rate announcement from National Bank of Poland (PLN) 11:00 Consumer confidence (EUR) 11:30 KOF leading indicator (CHF) 11:30 CPI (ZAR) 13:00 MBA Mortgage applications (USD) 14:15 ADP employment (USD) 01:01: Gfk Consumer confidence (GBP) 03:30 Trade balance (AUD) 03:30 Retail sales (AUD) 01:15 Nomura PMI (JPY) 07:45 CPI (CHF) 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.