FYI | Jul 31 2012
By Andrew Taylor, Market Strategist GFT
Top Headlines
o Main Events Schedule:
· Wed – FOMC meeting > seen as a non event
· Thu – Eyes on ECB action & Monti/Rajoy meeting
· Fri – Non Farm Payrolls
o AU Building Approvals data shows unexpected strength
o End of Month rebalance points to slight USD selling
o Market Moves:
· AUD sees solid support > Central Bank feel
· EUR dips a little on whether ECB will deliver
· Equity markets receive continued boost on CB action
· Gold remains at recent resistance looking for a break
· WTi and Copper tame
Overnight Asian equity markets decided to tempt fate with higher moves contrary to the non-event US session. Perhaps being the only time zone without the Live Olympics to distract meant it was business as usual.
The current elevated levels equate to actions by the ECB at Thursday’s meeting that will aid stressed bond markets, however, with two days still to go before the meeting, traders have now decided to revisit exactly what was said and rationalise why they reversed their outlook. In a classic situation of ‘shoot first and ask questions later’, the market finds itself questioning if they have in fact overshot the mark based on comments that should be no surprise.
To put it into perspective, the market is under no illusions that an announcement by the ECB will not be a game changer. The ECB is limited in what they can offer (like all Central Banks) and Thursday’s actions will be designed purely to buy time for struggling economies. The question is then how quickly will the market return to its destined course post ECB meeting? Well if the last FOMC meeting in June is anything to go by, it won’t be very long. To refresh those risk bulls memories, this was when Operation Twist was extended and in a similar scenario, markets realised that nothing had in fact changed, this saw initial profit takers fair best as they sent the markets snow ball south.
Outlook
Today will see a raft of economic data across the region with German labor data and euro zone flash CPI figures the pick of the bunch. Traders are keen to spot any further cracks in the European engine room as it seems that disastrous economic effects on Germany is what could bring this spiraling situation to head.
Economic Events to watch:
0600 GE Jun Retail Trade
0645 FR Jun Housing starts
0645 FR Jun Household consumption expenditure in manufactured goods
0645 FR Jun PPI
0800 GE Jul Labour market statistics (incl unemployment)
0900 EU Jul Flash Estimate euro area inflation
0900 EU Jun Unemployment
1000 FR Jun OECD CPI
For more intraday analysis and trade ideas, follow me on twitter @ATaylor_GFT
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