Market Drivers for July 30, 2013
Aussie crumbles off weak housing data and dovish Stevens
EUR/USD holds up well as German consumer confidence improves
Nikkei -3.32% Europe -0.01%
Oil $104.46/bbl
Gold $1329/oz.

Europe and Asia:
AUD Building Approvals -6.9% vs. 2.2%
JPY Household Spending -0.4% vs. 1.2%
JPY Jobless Rate 3.9% vs. 4.0%
JPY Industrial Production -3.3% vs. -1.4%
EUR German GfK Consumer Confidence Survey 7.0 vs. 6.9
EUR Euro-Zone Consumer Confidence
EUR German CPI -0.1% vs. -0.1%

North America:
USD Consumer Confidence 10:00

The Australian dollar was crushed today in Asian and early European trade after very weak housing data and uber-dovish commentary from RBA Chief Glenn Stevens sent the unit tumbling for more than 150 points.

Australian Building approvals contracted by -6.9% versus 2.2% eyed as demand for housing Down Under clearly slowed. However, the decline in AUD/USD really picked up momentum after RBA Governor Glenn Stevens reiterated his view that the currency remained overvalued in a policy speech earlier in Sydney today.

Dr. Stevens stated that, “”We have been saying recently that the inflation outlook may afford some scope to ease policy further if needed to support demand. The recent inflation data do not appear to have shifted that assessment.”

The OIS market jumped as high as 85% probability of rate cut in August off those remarks as traders quickly pushed the Aussie lower. Dr. Stevens then continued to talk the currency down by stating that Australia’s mining boom has peaked and that he expects the dollar to continues to depreciate as it reacts to the fall in the terms of trade.

The net result of Dr. Steven’s remarks was the equivalent of kicking the Aussie when it was down, as the pair absorbed all of the dovish news by falling through the 9100 figure before finally stabilizing at 9050. The shorts will no doubt continue to press their case as they gun for the key 9000 barrier, but if the RBA does not cut rates next week, the unit could see a sharp rebound on surprise short covering.

In contrast to the Aussie the euro traded much better, holding above the 1.3250 level for most of the night. German GFK consumer confidence hit 7.0 – its best reading since 2007 as the economy in Germany continues to outperform the rest of the EZ. The pair remains capped ahead of the 1.3300 figure, where reported option barriers still lurk, but it is definitely well bid on the crosses with EUR/AUD rising to 1.4650 and EUR/GBP inching towards the 8700 level onec again.

In North American trade we have one last day of quiet before the deluge of economic data hits the market. Today only the consumer confidence data is on the docket, but with the buck a bit better bid, it may provide the catalyst for USD/JPY to take out 98.50 as the day proceeds.

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