Market Drivers for June 25 2014

Pound comes under pressure early but holds 6950

GE GFK Consumer sentiment at 8.9 vs. 8.5

Nikkei -.71% Europe -.35%

Oil $106/bbl

Gold $1313/oz.

Europe and Asia:

EUR GE GFK Consumer sentiment 8.9 vs. 8.5

EUR Italian Retail Sales 0.4% vs. 0.2%

North America:

USD Durable Goods 8:30 AM


Currency markets were generally quiet today as muted economic calendar kept most major pair in tight ranges through Asian and early European trade.

USD/JPY continued to wallow below the 102.00 figure as the rally post yesterday’s better than expected New Homes Sales figures dissipated amidst sinking yields and spike in risk aversion flows. The Nikkei dropped by 0.71% in the aftermath of the reversal in the S&P and the decline in stocks kept downward pressure on the pair.

In UK cable continued to see selling flows at the start of London trade after yesterday’s disappointing testimony from BoE Governor Mark Carney who suggested that UK rates are likely to remain low for the foreseeable future. GBP/USD tested support ahead of the 1.6950 and for now found buyers ahead of that level. However we believe that the downward pressure on the pair will remain especially if Mr, Carney reaffirms his statements when the UK central bank issues its Financial Stability report tomorrow.

On the economic front, the UK CBI distributive trades survey printed at 4 versus 25 eyes dropping sharply from the 16 reading the month prior. The drop in June was due to a sharp falloff in clothing sales. This was the worst CBI reading since October of last year indicating that retail demand may be starting to wane.

The EUR/USD fared a bit better propped by stronger than expected reading in the GFK Consumer sentiment survey which rose to 8.9 from 8.5 the month prior. The pair rose to a high of 1.3620 but failed to hold the highs as the night wore on.

The lackluster pace of trade may be justled somewhat by the release of today’s US Q1 GDP figures. Although this is yet another revision the market is steeling itself for a markedly worse number with several analysts on Wall Street anticipating a downward revision of as much as -2.0%.

Granted the Q1 figures are seriously dated and most likely skewed by unusual seasonal factors, but such a sharp decline could still have an impact on currency and fixed income markets. If Q1 GDP did indeed contract at such a sharp pace then it will have a negative impact on the overall annual figures and could delay any action by the Fed even further, putting additional pressure on the buck.

On the other hand if the GDP numbers print at -1.5% or better they will be viewed with relief especially since the more recent US economic data has been relatively robust. A better than expected GDP reading could finally spark a rally in US rates and push USD/JPY through the 102.00 figure and keep it above that level as the day proceeds.

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