Morning Briefing

Morning Briefing for Thursday, 02 Aug 2012 (Updated 08:58:39 CET)Draghi gets the limelight today – another disappointment for the euro?

What’s new:

Asia: Equities lower in line with their US counterparts
FED: Unchanged, but softer growth and ready to act
Australia:  Better than expected retail sales
ECB: today is Draghi’s big day 

 

Rates in Asia and Indexes:

EURUSD: 1.2218– 1.2256.
USDCHF: 0.9803 – 0.9832.
GBPUSD: 1.5523 - 1.5550.
EURJPY: 95.82 – 96.17.
USDJPY: 78.36 – 78.53.
DowJones : 12’971.06 -0.29%
NASDAQ: 2'920.21 -0.66% 
S & P 500: 1'375.32  -0.29% 
Nikkei: 8’673.62 +0.37%
Shanghai: 2'106.96 -0.77.%
Gold: $ 1'601.00 -0.17%
Crude Oil: $ 88.84 -0.08%
 
 

Comments:

At the conclusion of yesterday’s FOMC meeting the US Federal Reserve decided to make no changes to policy. While this outcome was the expected one it came as a disappointment for those investors that somehow had hoped that the FED would be down to business again.

While this lent support to the USD; equities slipped lower and the price of Gold bottomed out after slipping lower ahead of the FED and the US session. This morning the USD manages to hold to most of the gains made yesterday; but major currency pairs remain hesitant ahead of Draghi today.

While the USD should try to keep its grip ahead of September’s next FOMC meeting (where action is expected from the FED) strength for the USD should be somewhat moderated by what came out of the Fed yesterday; decelerating economic growth for H1 2012 and a warning that they are closely monitoring economic developments and will provide additional stimulus if needed.

Overnight Australia reported better than expected retail sales for the month of June; actual figures came out at 1% against the expected 0.7% and the previous month’s 0.8%. The Aussie pared earlier losses against the USD as the data hit the wires; and while it was overall in gain when seen against the majors – the antipodean currency’s gains were just an average +0.11% at the time of writing.

Investors will be looking out to see if ECB President Mario Draghi will do “…whatever it takes to save the euro” later today. Dubbed super Mario, and probably deemed one of the most respectable figures within the Euro Zone Mr Draghi will have some pressure today to match the expectations his own comments fuelled just last week.

While speculation is that the ECB might reactivate the SMP, the largest euro zone central bank, the bundesbank has insisted on reminding the ECB president that the ECB should stick to its own mandate i.e price stability and let fiscal issues for Governments. In the end the ECB is expected to work in conjunction with the EFSF (or the ESM until it is finally set up) but given the cautious tone will likely stick to announcing a reactivation of the SMP without giving any details regarding to timing, size etc.


Good Day,