16/08/2013

Global indices fell and the USD took a beating as well after solid US job figures added to the confirmation that the Fed will start the so-called tapering on the September meeting. Following soft producer prices on Tuesday, better than expected consumer prices from the US economy supported this scenario, as the tapering could add some upside pressure on the short end of the rate curve. Strong housing data from the NAHB were not enough to help the indices from ending the day in negative.

As a result of the weaker US Dollar, both EUR/USD and Cable took out key resistance levels, backed up by local figures. EUR/USD enjoyed some of the positive growth and ZEW figures from earlier this week, which made for a constructive scenario. We could see a re-test of the June highs at 1.3415 within the near term. From  UK Retail Sales surprised to the upside, and the pair has now closed above the 2013 bear trend projected from the 2013 highs, which opens up for a re-test of the 1.5750 level soon.

Today, the morning session will be dominated by the Final July HICP Inflation figures from the Eurostat, which we don't expect will have a big impact in the markets. The core figure will attract some attention as the consensus among market analysts is for a drop in the yearly figure of -1.1% vs. -0.9% in the first release. Should we see a larger drop than expected, we could see the EUR being offered, making it even more difficult for the ECB to set the monetary policy without staying dovish.

From the US, at 12:30GMT, the July Housing Starts (exp at 900k vs. 836k prior) and Building Permits (exp 945k vs. 918k prior) are released. Housing figures in the US have been decent this year, and we could see this trend continue in the July figures, which should be positive for risk taking, especially in the construction and home-building sector. At 14:00GMT, the preliminary August Michigan Consumer Confidence will be out, expected to increase a tad to 85.2 vs. 85.1 prior. If the markets act as usual, then the real move will come post the Michigan figures as the markets are awaiting confirmation.

Have a nice weekend!