Today's Key Points

Daily Forex Fundamentals | Written by Danske Bank | Jul 04 08 07:40 GMT |

* US equities closed the day on a positive note after a job markets report in line with expectations.
* EUR fell two figures versus USD as bond yields dropped in Europe after ECB was less aggressive than most expected.
* US markets are closed for Independence Day. We are looking for factory orders out of Germany as the only data of interest today.

Markets Overnight

US markets closed down early yesterday on a positive note ahead of Independence Day today after payroll data suggested that the job market was not as dire as many investors had feared, while the European Central Bank (ECB) president struck a less aggressive tone on prospects for rate hikes.

In a shortened session, with regular trading set to end at 19.00 CEST, volume was light. The Dow Jones was up 0.9% and S&P500 added 0.6%, both led by Exxon Mobil Corp (+2%) and rival Chevron Corp (+1%) as oil set new highs (again). The Nasdaq Composite Index was up 0.3%.

Crude oil went as high as USD 145.85 per barrel before erasing most gains with the approach of the long holiday weekend.

US Treasury bond yields did not move much yesterday, although the yield curve steepened by 5bp with 2yr yields declining to 2.55% from 2.60%. 10yr yields were broadly unchanged at 3.99%

On FX markets demand for the dollar rose sharply after ECB comments and job report for June were largely as forecast. Thus EUR/USD fell roughly two big figures from 1.59 to 1.57 from 14.30-15.00 CEST, and the pair has been fairly stable since then - currently trading at 1.572. USD/JPY rose from 106 to the current level of around 106.8.

Mixed picture of Asian equity markets this morning as Hang Seng adds 1.1% and Nikkei225 drops 0.9% as we speak.
Global Daily

The calendar for today is relatively thin. The US markets are closed for Independence Day and in Euroland the only data of interest is German factory orders from May published at 12:00. Following three consecutive months of decline, the numbers are expected to show a minor improvement with an 0.6% m/m reading, but that will do little to the soft trend. Later in the day Trichet is scheduled to speak, but we do not expect him to reveal anything new on the monetary policy outlook so closely after the policy meeting.

Following yesterday's re-pricing in European bond markets on the back of the ECB press conference we do not expect much action today. Bond yields should be left with equities and credit markets as their only directional guide.

Danske Bank
http://www.danskebank.com/danskeresearch