FYI | Aug 02 2012
By Andrew Taylor, Market Strategist GFT
Top Headlines
o FOMC delivers as expected and remains firm
o ECB meeting main event risk ahead > Pressure to deliver
o AU Trade Balance & Retail Sales Data surprises on both counts
o Market Moves:
• EUR and AUD off slightly post FOMC meeting
• Asian equities mixed on low volume trade ahead of ECB meeting
• Precious Metals and Copper meet resistance post FOMC meeting
US markets provided the considerable action overnight as the Federal Reserve held firm on its monetary policy stance. The markets by and large had this result factored in, although ‘selling on fact’ saw equities, commodities and risk currencies move lower.
Chatter quickly returned to today’s ECB meeting where the market is in no mood for disappointment. The last few days have given traders time to question their optimistic positions based on President Draghi’s comments last week. This has the market feeling that the ECB owes them the result that they have bought into and anything less will be a betrayal of their trust.
Australia showed a strong surprise in its retail sales figures for June coming in at 1.0% beating the 0.7% the market had forecast. This rise will be short lived as it is a direct reflection of government handouts delivered at the time to boost spending to which it succeeded in doing. Australia also managed to beat Trade Balance expectations convincingly as it posted a A$ 9M surplus against a A$347 deficit forecast. Exports were expected to be the damaging side of the ledger when in fact it held up nicely amidst weakening commodity prices and perceived slowing demand. This will boost sentiment for the economy as it proves resilient to economic woes that are happening around them.
Outlook
In the lead up to the FOMC meeting, markets managed to reignite another round of risk asset buying in anticipation of action being taken. This is likely to happen again before the ECB announcement which will provide good selling opportunities as the price approaches proven resistance levels. On release the ECB will need to beat the market’s expectations to push higher, something that is possible but not probable. If the ECB delivers as expected then the markets may see a brief cheer rally before profit taking and realities reclaim its rightful ownership.
Economic Events to watch:
0830 UK Jul CIPS Construction PMI
0900 EU Jun PPI
1100 UK Aug UK interest rate decision
1130 US Jul Challenger Job-Cut Report
1145 EU EU interest rate announcement
1230 EU ECB President Draghi Speech
1230 US Jul 28 Initial Jobless Claims
1345 US Jul ISM-NY Report on Business
1400 US Jun Factory Orders
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