- EZ PMI not as bad as feared
- ZEW much worse at -37.6 vs. -24.8 eyed
- Nikkei up 1.22% Europe up nearly 2%
- Oil at $85/bbl
- Gold off the $1900/oz to $1883/oz.
- EUR PMI 51.5 Svc. 49.7 Man
- NZD Reserve Bank of New Zealand 2-Year Inflation Expectation (3Q) 2.9%
- CHF Trade Balance (Swiss franc) (JUL) 2.83B vs. 1.82B
- EUR German ZEW Survey (Current Situation) (AUG) 53.5 vs. 85
- EUR German ZEW Survey (Economic Sentiment) (AUG) -37.6 vs. 26.0
- EUR Euro-Zone ZEW Survey (Economic Sentiment) (AUG) -40.0 -.6.2
- GBP BBA Loans for House Purchase (JUL) 33.4K vs. 32.3K
Event Risk on Tap
- USD New Home Sales (JUL) expected at 315K
- USD New Home Sales (MoM) (JUL) expected at 1.0%
- USD Richmond Fed Manufacturing Index (AUG) expected at -5
- CAD Retail Sales (MoM) (JUN) expected at 0.6%
- CAD Retail Sales Less Autos (MoM) (JUN) expected at 0.4%
- USD/JPY drifts towards 76.60
- AUD/USD rises above 1.0500 on risk flows
- GBP/USD above 1.6550 on risk and better BBA mortgage numbers
- EUR/USD rallies to 1.4475 after PMIs better as expansion still in place
Risk FX rallied in early European trade today buoyed by strong gains in equities and a better than expected EZ PMI data that showed economic activity in the region continued to expand albeit at a slower pace. EUR/USD rallied to 1.4500 level in morning European dealing and was unfazed by much weaker than expected ZEW survey which reflected the turmoil in global capital markets over the past several weeks.
EZ flash PMI readings for the month of August printed mixed but generally remained in expansionary territory boosting investors sentiment in early European trade as both equities and risk FX rallied. French Services PMI rose to 56.1 from 53.3 forecast while the Manufacturing gauge slipped to 49.3 versus 50.1 eyed. In Germany the picture was reversed with manufacturing doing better than expected at 52.0 versus 50.9 while the PMI services slipped to 50.4 from 52.1 projected.
The overall PMI for the EZ region showed that Manufacturing slipped below the 50 boom/bust line for the first time in 2 years printing at 49.7 while Services remained relatively buoyant at 51.5. Although the latest readings of EZ economic activity were clearly mixed they were not nearly as downbeat as some market observers had feared given the turmoil in the financial sector over the past month. Nevertheless, collectively the numbers point to flat quarterly growth and suggest that EZ economy will slow considerably in the second half of 2011.
On a more ominous note German investor sentiment dropped sharply as the ZEW survey printed at -37.6 versus -25.0 eyed as the volatility of the past several weeks took its toll. The index is now its lowest level since December of 2008 as investors fear that economic conditions are likely to deteriorate markedly. Yet the ZEW data tends to be more a sample of current financial conditions rather than a true measure of economic activity. Tomorrow's IFO report will be of much greater interest to the market as traders try to gauge the extent of the slowdown in core Europe from its latest reading.
For now the EUR/USD is getting the benefit of the doubt from risk flows as the underlying assumption of the bulls is that the global economy will continue to expand in H2 of 2011. However as we noted earlier the euro will likely find some resistance above the 1.4500 level especially if US equities fail to extend the rally.
|USD||14:00||10:00||New Home Sales (JUL)||315K||312K|
|USD||14:00||10:00||New Home Sales (MoM) (JUL)||1.0%||-1.0%|
|USD||14:00||10:00||Richmond Fed Manufacturing Index (AUG)||-5||-1|
|CAD||12:30||8:30||Retail Sales (MoM) (JUN)||0.6%||0.1%|
|CAD||12:30||8:30||Retail Sales Less Autos (MoM) (JUN)||0.4%||0.5%|