Market Drivers July 25, 2017
Kiwi drops on cow disease fears but recovers
EZ IFO beats
Nikkei -0.10% Dax 0.33%
Europe and Asia:
EUR IFO 116.0 vs. 114.9
USD HPI 9:00
The IFO business sentiment survey surprised to the upside reaching its highest value since German unification, but EURUSD was unmoved by the data remaining at 1.1650 level for most of Asian and early European dealing.
The IFO beat on all fronts with the Climate index coming in at 116.00 versus 114.9 while business expectations rose to 107.3 from 106.5 forecast. According to Ifo chief Clemens Fuest, “German businesses are euphoric. Companies’ satisfaction with their current business situation reached its highest level since Germany’s reunification. Their short-term business outlook also improved. Germany’s economy is powering ahead.”
For now there seems to be little concern about the strengthening euro as the increased demand in the Eurozone is offsetting whatever negative effect rising exchange have elsewhere. The news confirms the ECB modestly bullish stance on monetary policy which likely to leads the bank towards QE taper by the fall.
The EURUSD however, saw little reaction to the news, but remained near recent highs. The pair has essentially been consolidating this week as traders await the FOMC decision this Wednesday. Any hesitancy by Ms. Yellen and company will likely push the pair through the key 1.1700 figure before the end of the week.
Elsewhere, the rest of the FX field was quiet as well, but kiwi took a quick tumble on reports of a deadly cow disease in one the herds. The disease does not affect humans and so far has only been found in one 150 cow herd, so NZDUSD recovered its losses quickly, but the pair was lower against Aussie as currency traders remained wary of any further bad news to come.
In North America today the calendar continues to be very quiet and the main drivers of trade will be political rather than economic as Senate votes on debate for the replacement of the Affordable Care Act. No one can handicap with any certainty as to how the vote will go, but failure here would doom any attempts at repealing Obamacare. In either case the drama in DC may provide some volatility for FX until tomorrow’s FOMC decision takes center stage.