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Talking Points

  • Dollar, Yen Outperform as Asian Shares Follow Wall Street Lower
  • S&P 500 Stock Index Futures Hint Risk Aversion Set to Continue
  • US Fed Minutes Likely a Non-Event, Earnings Calendar in Focus

The US Dollar and Japanese Yen soared in overnight trade as Asian stock markets followed Wall Street lower, with broad-based risk aversion boosting safe-haven demand for the former currency and sparking an unwinding of carry traders funded cheaply in the latter. S&P 500 stock index futures – a proxy for sentiment trends – are trading sharply lower ahead of the opening bell in Europe, pointing to more of the same in the coming session.

The MSCI Asia Pacific regional equity index fell 1.8 percent as familiar headwinds from escalating contagion in the Euro Zone, disappointing US labor market figures and continued dead-lock over raising the US debt ceiling were compounded by yet more evidence that China would step up efforts to cool economic growth. The broadest measure of Chinese Money Supply growth (M2) accelerated to 15.9 percent in June, topping economists’ expectations and yielding the strongest result in three months.

On the data front, UK Consumer Price Index figures headline the docket, with expectations calling for the annual inflation rate to hold steady at 4.5 percent. The outcome is unlikely to garner much attention however considering the Bank of England is widely believed to be firmly on hold for the foreseeable future. Indeed, BOE Governor Mervyn King and company have allowed for the possibility of inflation hitting 5 percent over the near term without abandoning the current policy setting, so anything shy of that is probably not going to stir the British Pound in a meaningful way.

Looking further ahead, minutes from June’s Federal Reserve monetary policy meeting on tap in US hours are unlikely to offer anything that has not already found its way into exchange rates following Chairman Ben Bernanke’s post-FOMC press conference. This is likely to put the spotlight on the earnings calendar, with industrial and construction materials supplier Fastenal Co. on tap to report second quarter results.

The firm’s business area and international reach (it operates throughout North America, China, Singapore and the Netherlands) makes it de-facto sensitive to global economic growth trends, so a positive result coupled with supportive guidance for the remainder of the year could slow the collapse in market-wide sentiment. Needless to say, a disappointing outcome threatens to compound risk aversion. Expectations call for the earnings of 0.304 cents per share, the strongest quarter in over a decade.

Asia Session: What Happened

GMT

CCY

EVENT

ACT

EXP

PREV

23:01

GBP

BRC Sales Like-For-Like (YoY) (JUN)

-0.6%

-1.4%

-2.1%

23:01

GBP

RICS House Price Balance (JUN)

-27%

-25%

-28%

23:50

JPY

Tertiary Industry Index (MoM) (MAY)

0.9%

0.7%

2.5%

23:50

JPY

Domestic Corporate Goods Price (MoM) (JUN)

-0.1%

-0.2%

-0.1%

23:50

JPY

Domestic Corporate Goods Price (YoY) (JUN)

2.5%

2.4%

2.2%

0:30

AUD

NAB Business Conditions (JUN)

2

-

0 (R-)

0:30

AUD

NAB Business Confidence (JUN)

0

-

6

2:00

CNY

New Yuan Loans (JUN)

633.9B

622.5B

551.6B

2:00

CNY

M0 Money Supply (YoY) (JUN)

14.4%

-

15.4%

2:00

CNY

M1 Money Supply (YoY) (JUN)

13.1%

13.0%

12.7%

2:00

CNY

M2 Money Supply (YoY) (JUN)

15.9%

15.3%

15.1%

2:00

CNY

Foreign Exchange Reserves (US$) (JUN)

3197.5B

3233.0B

3044.7B

Euro Session: What to Expect

GMT

CCY

EVENT

EXP

PREV

IMPACT

5:30

EUR

French CPI - EU Harmonized (MoM) (JUN)

0.1%

0.1%

Low

5:30

EUR

French CPI - EU Harmonized (YoY) (JUN)

2.2%

2.2%

Low

5:30

EUR

French CPI (MoM) (JUN)

0.1%

0.1%

Low

5:30

EUR

French CPI (YoY) (JUN)

2.1%

2.0%

Low

5:30

EUR

French CPI Ex Tobacco Index (JUN)

122.49

122.4

Low

6:00

EUR

German CPI - EU Harmonized (MoM) (JUN F)

0.0%

0.0%

Low

6:00

EUR

German CPI - EU Harmonized (YoY) (JUN F)

2.3%

2.4%

Low

6:00

EUR

German CPI (MoM) (JUN F)

0.1%

0.1%

Low

6:00

EUR

German CPI (YoY) (JUN F)

2.3%

2.3%

Low

6:45

EUR

French Current Account (€) (MAY)

-

-4.8B

Low

8:30

GBP

Consumer Price Index (MoM) (JUN)

0.2%

0.2%

Medium

8:30

GBP

Consumer Price Index (YoY) (JUN)

4.5%

4.5%

High

8:30

GBP

Consumer Price Index Core (YoY) (JUN)

3.3%

3.3%

High

8:30

GBP

Retail Price Index (JUN)

235.8

235.2

Medium

8:30

GBP

Retail Price Index (YoY) (JUN)

5.2%

5.2%

Medium

8:30

GBP

Retail Price Index (MoM) (JUN)

0.3%

0.3%

Low

8:30

GBP

RPI Ex Mort Int. Payments (YoY) (JUN)

5.3%

5.3%

Medium

8:30

GBP

DCLG UK House Prices (YoY) (MAY)

-

-0.3%

Medium

8:30

GBP

Visible Trade Balance (£) (MAY)

-£7336

-£7389

Medium

8:30

GBP

Trade Balance Non EU (£) (MAY)

-£4250

-£4339

Low

8:30

GBP

Total Trade Balance (£) (MAY)

-£2700

-£2762

Low

Critical Levels

CCY

SUPPORT

RESISTANCE

EURUSD

1.3794

1.4105

GBPUSD

1.5776

1.6014

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