Today's Key Points

Daily Forex Fundamentals | Written by Danske Bank | Jul 07 08 07:35 GMT |

• Markets start sleepy after 4 July weekend - EUR/USD is trending slightly downwards
• Nikkei ends worst decline since 1954 by rising close to 1%
• No big market movers today - only tier 2 data and a speech from Fed's Yellen

Markets Overnight

Friday was unusually quiet as the US markets were closed for Independence Day and Europe took a breather after an extremely hectic Thursday with rate decisions, speeches and important data releases.

In FX markets, EUR/USD has drifted slightly lower overnight without any specific drivers. The pair now trades around 1.5650, the lowest since 26 June and the average over the past two weeks. As the dollar has appreciated versus the euro, so has sterling. EUR/GBP has fallen slightly overnight and is trading just around the 0.7910-mark. Largest mover in the G10 last week, the SEK, is unchanged versus euro overnight with EUR/SEK at 9.38. Despite huge market activity in the past week, the FX market has been relatively stable and most pairs are somewhat unchanged compared to one week ago.

Asian equities have started the week on a positive note. After a 12-day decline of 8.4%, the longest since 1954, Nikkei225 is up 1% at the time of writing. Hang Seng has gained 1.5%.

According to AAA, the largest U.S. motoring group, the fewest Americans in three years likely travelled over the 4 July weekend as record gasoline prices and a slowing economy force consumers to curtail spending. Trips of at least 50 miles fell 1.3% to 40.5 million.

Oil prices have fallen slightly overnight. Crude for August delivery has dropped from $146.85 per barrel to now just below $144 per barrel. Supply risks persist with the continuation of Iran's nuclear program heightening concerns of a military conflict, ongoing problems in Nigeria and uncertainty on the united stance of OPEC. Chinese business climate index for 2nd quarter rose from 136.2 to 137.4.

Global Daily

After last week's super-Thursday the markets should be able to continue to recuperate today as the agenda for economic data is very meagre. In many countries around Europe we will see industrial production data today, but this will hardly prove much of a market mover for any market. In the US there are no scheduled data releases, but there is a speech on the programme by FOMC member Yellen, on the US economic outlook.

The G8 meeting begins today in Osaka. The heads of state of the G8 nations (Canada, France, Germany, Italy, Japan, Russia, UK and the US) plus the EU as well as the heads of state of Brazil, China, India, Mexico, South Africa and many more are gathered for a three-day event. Together, these nations represent one third of global energy supply and two thirds of global energy consumption. They have, in other words, significant market power if unifying. Despite that, we believe that they will stick to imploring OPEC to increase production rather than to address their own problems with surging oil prices. Coordinated intervention in FX markets will probably be too techy for heads of state, so this issue will be left for the finance ministers, who meet in September

Scandi Daily

In Sweden we receive the budget outcome. We have no numerical target, but suspect that the better than expected results over the last few months may persist. However, given the large volatility on financial markets this second-rate variable will probably not have any major impact on neither rates, nor currency.

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