13/08/2013

Risk sentiment was mixed in equity markets and the US Dollar strengthened against most peers in yesterday's trading session, which did not contain many surprises to the current environment and investors are positioning for key data to be released later this week.

EUR/USD pulled back and closed below the trend line projected from the 2013 highs, Euro Stoxx 50 managed a small gain and in the US, Dow Jones and S&P lost a tad while the Nasdaq managed to close in green. In Europe, focus was on the performance of the Greek economy which contracted 4.6% in Q2 year on year against a drop of 5.6% in Q1. EUR-pairs were not that affected of the release as there are more interesting items on the menu this week. Swiss Retail Sales came out better than expected on non-food items.

From the US, the Federal Reserve posted the July Treasury statement, which revealed a budget deficit of $98bn - in line with consensus. For 2013, this means a 38% improvement for the full year compared to 2012, which should have a positive effect on the US Dollar. The big question is still regarding the expected Fed tapering, where the overall consensus points towards an initiation on the September FOMC meeting.

From Japan, the government is considering a cut in the corporate tax level as a measure of further easing an boost the export-related economy back in line with the BoJ's own targets. Risk taking picked up as a result and major Asian markets closed in green.

This morning, German and Spanish inflation figures came out as expected and later today from the Euro zone, the June Industrial Production will be interesting, expected to increase 1.0% against a drop of 0.3% in May. Also the ZEW indices will attract attention, and the German Expectations Index for August is expected to show an increase to 39.9 against 36.3 prior. As this is one of the leading indicators and proxy for the core countries, better-than-expected figures could result in a boost in risk taking and a pick-up in the EUR.

UK Consumer and Retail Prices at 08:30 GMT will shift focus towards GBP-pairs, where the market is expected unchanged monthly rates. We don't expect major surprises for GBP-pairs today in light of the key employment data to be released tomorrow. However, the current correction in GBP/USD could extend below 1.5440-area.

Key for today will be the US figures at 12:30GMT, where we have the Retail Sales and Import Prices for July. Core Retail Sales expected to increase 0.4% against 0.1% in June and as a result of the increasing fuel prices, the headline Import Prices are expected to post a 0.8% increase against -0.2% prior.