Market Drivers July 9th, 2012
Risk FX moribund in post NFP trade
Aussie sees further selloff as concerns over China mount
Nikkei -1.37% Europe -0.71%
Oil $84.60/bbl
Gold $1582/oz.

Europe and Asia:
AUD ANZ Job Advertisement -1.2% vs. 2.6%
JPY Machine Orders -14.8% vs. -2.4%
JPY Current Accounts 0.28T vs. 0.42T

JPY Eco Watchers Survey 43.8 vs. 47.6
CHF Unemployment Rate 2.9% vs. 3.2%
EUR German Trade Balance 15B vs. 15.7B
EUR Eurozone Sentix Investor Confidence -29.6 vs. -26.3

North America:
USD Consumer Credit 15:00
CAD Business Outlook Future Sales 10:30
CAD BOC Senior Loan Officer Survey 10:30

Risk FX remained moribund in post-NFP Monday Asian and European trade with EUR/USD capped at the 1.2300 handle after setting fresh year to date lows on the Australian open. The unit continues to be dogged by concerns over periphery sovereign debt and mounting evidence of global economic slowdown. As many analysts have pointed out the euro has correlated well with the 10 year Bund/Bono spread and today’s increase in Spanish rates has helped to put some pressure on the unit in early morning European trade especially after the report that Valencia may face default if it does not get further aid from Federal government.

The economic calendar was not much help with EZ Sentix investor confidence falling to new low of -29.6 versus -26.3 eyed while the German Trade Balance came in a bit light at 15B versus 15.7B forecast. However, it was the data from Asia that produced the most downside pressure today with Japan, Australia and China all reporting markedly weak results.

In Japan the machinery orders numbers fell off a cliff dropping -14.8% versus -2.4% expected. This was the steepest drop since comparable data was made available in 2005. However, officials warned not to read too much into the data which can be highly volatile on a month to month basis. The authorities noted that the drop was exaggerated by seasonal factors including a large one off orders in chemical and machinery sectors last month.

Nevertheless the Japanese data contributed to the gloomy atmosphere especially after Australian job advertisements fell for the third month in a row suggesting that this month employment data could be weak. Meanwhile in China the tepid CPI data which printed at 2.1% and the sharp decline in PPI which fell -2.1% stirred speculation that the country may now be a deflationary cycle and caused Aussie to selloff towards the 1.1050 level as the night progressed.

China will hold the key to currency trade over the next 24 hours as traders await the Chinese Trade data for June. Markets are looking for a rebound to 24 Billion from 18 Billion the period prior, but if the data disappoints it could confirm fears of major slowdown in Chinese business activity and send risk FX to fresh lows for the week as concerns mount that global economic growth is slowing to a halt.

In North America today the calendar is nearly barren with only consumer credit on the docket and much of the flow will likely be governed by the action in equities. After a drubbing on Friday risk assets may see a small short covering rally as the day develops if no further negative news hits the tape, but the action is likely to be subdued as markets look for more data points before making any further directional moves.

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