Markets are trading fairly flat with Wall Street closed for the US holiday and the height of vacation season in the US and European participants tentative after the huge moves on Friday. EURUSD has crept back to the 1.25-1.26 range that it inhabited during the week leading into the EU summit. The Canadian dollar is holding to its gains vs. USD, trading at 1.015 as WTI for settlement in August is trading higher as well, up USD1.50 at 85.25. Treasuries are fairly flat, with the 10-year even at a yield of 1.58%. Italian and Spanish paper are holding on to the gains that they made last Friday, with both moderately bid.
Generally speaking, volumes are light due to the holiday. In spite of the fact that this is essentially a holiday week in US markets, the data docket is heavy and risks associated with it fairly high. Aside from the ISM manufacturing index released yesterday (which fell to its lowest reading in years at 49.7) and the BLS nonfarm payrolls data due out on Friday, this week also features data on the two drivers of the economy during Q1 2012: construction and cars.
Automotive-related activity throughout the various components of the US economy accounted for most of the Q1 GDP gain. According to the third revisions to US GDP data released by the BEA, 1.16% of the 1.9% q/q SAAR growth was attributable to motor vehicle output, which was supported by eco data released as markets closed for the holiday, giving Wall Street a last push upwards.
EURUSD (1.2591) The day was fairly light with US markets closing early and on holiday today. The euro remained in a tight range with little activity, waiting on Thursday’s ECB decision. Traders are expecting the ECB to reduce rates by 25bps.
The Great British Pound
GBPUSD (1.5672) The pound has been holding right at the 1.57 number, with little gains and losses by holding tight. The main event this week is the Bank of England meeting; most traders think that the BoE will offer some additional monetary easing, where some think that BoE Governor King will reduce rates. The meeting in on July 5th. Traders sit and wait, with no action and no eco data due today.
Asian –Pacific Currency
USDJPY (79.77) as investors remained optimistic, risk aversion changed to risk appetite as most commodities were able to hold on to Friday’s gains. The USD was strong in early trading but fell on poor eco data, where as the yen was supported by positive manufacturing data, which was offset by a poor PMI report from China. The pair sit and wait with the US holiday keeping markets quiet.
Gold (1616.45) added more shine in early Asian trading on Wednesday morning trading above the 1600 price level There are undercurrents and rumors that the Fed may offer some additional stimulus to help pump up the sagging economy. With the US closed on Wednesday for the holiday, investors may be moving to safety prior to the holiday. This is called the Central Bank game. Sit and wait. US markets are closed today.
Crude Oil (87.17) Iran never misses a chance to turn up the rhetoric and with military exercises scheduled in the Gulf of Hormuz, the political and military threats become louder. This is so reminiscent of Khrushchev in the early 60’s banging his shoe on the table.. Noise and noise.. Threats and demands to later cower back home. Will NATO be disbursed?