Market Commentary 29/07/09
Key Themes
The main themes deciding market direction currently are: -
Signs of stabilisation in the US housing and labour markets and positive economic reports elsewhere add to the bullish mood.
Investor confidence still improving with renewed risk appetite causing further flows out of USD (this was, however, slightly contradicted by Tuesdays weaker than expected consumer confidence figures out of the UK and US which prompted a move back into US bonds and strengthened the Dollar).
Ongoing concerns over the UK economy and the government handling of it. This is leading to market concerns that there may be a sterling crisis ahead.
In the News
US Stocks fell and the S&P 500 retreated from an 8 month high as consumer confidence figures in the US came in below expectations, a second monthly fall in a row.
London equities continued to ease back following news of sharply lower profits, in particular at BG Group.
Asian Stocks fell for the first time in 12 days as lower commodity prices and disappointing profit reports raised concern the recent rally has made equities expensive relative to earnings prospects (source: Bloomberg).
The RBA have signalled they may look to raise interest rates as they have seen a recovery in the economy, boosting the AUS against a basket of currencies.
Core Data released today
Wednesday 29th July
13:30 – US Core Durable Goods Orders, m/m Exp 0.1%
Seen as a leading indicator of production – rising purchase orders signal the manufacturers will increase activity.
(NOTE: While better than forecast figures are usually good for the Dollar, current market conditions mean the reverse tends to be true as investors take refuge in US bonds)
Market Sentiment and Consensus
EURUSD
Today – Sell whilst below 1.4216 to 1.4130. 25% chance of breaking above 1.4268 then 1.4306.
This week – Cautious buy above 1.4056 to 1.4291 and 1.4338
GBPUSD
Today – Cautious sell to 1.6310 and 1.6263 after it dropped below 1.6382, but expect increased volatility.
This week – cautious buy if it remains above 1.6263 to 1.6588
EURGBP
Today – flat, although cautious buy if it breaks through 0.8648 to 0.8667 and 0.8688
This week – cautious buy whilst above 0.8572 to 0.8694 and 0.8756.
