Forex headlines for July 10, 2014:
- US initial jobless claims 304k vs 315k exp
- US May wholesale sales +0.7% vs +0.9% exp
- Bank of Portugal says solvency of Banco Espirito Santo is “solid”
- Banco Espirito Santo has enough capital to deal with default by Groupo Espirito Santo – RTRS source
- Fed could try to make benchmark rate more reliable in overhaul – FT
- Fed’s George: US growth to be in 2.0-2.5% range in 2014
- ECB’s Nowotny: No need for further ECB action in near future
- Canada May new house price index 0.1% m/m vs 0.2% expected
- Dollar store exec warns on US economy
- China says both sides agree to avoid sustained, disorderly and competitive currency depreciation
- France’s economic minister Montebourg has a moan up about the ECB
- US Treasury sells $13 billion in 30-year bonds at lowest yield in a year
- Carl Ichan says it’s time to be cautious about the US stock market
- Gold up $8 to $1336
- WTI crude up 58-cents to $102.87
- S&P 500 down 8 points to 1964 after falling as low as 1952
- CAD leads, AUD lags
There were 5 reasons why markets were gripped by fear on Thursday, at least in the early going:
- A large shareholder of Portugal’s second largest bank Banco Espirito Santo missed a debt payment
- Chinese June exports rose 7.2% y/y compared to 10.4% expected
- Japanese machine orders collapsed 14.3% y/y compared to a 10.1% rise expected
- French industrial production fell 1.7% in May compared to +0.2% expected
- US retailers are warning on a weak consumer
A sea of worries hit markets as US traders came to their desks. The reaction was to sell stocks, buy bonds, sell risk and ask questions later. Over the course of the day a few of the questions were answered and some soothing words on Portugal helped to improve sentiment.
Naturally, the yen was the beneficiary of the worries. USD/JPY fell a half-cent at the lows to touch 101.07 but nounced back above the late-June low to 101.31 which creates a less bearish picture. EUR/JPY touched the lowest since February and it’s clear that sentiment is shaky.
A few of the headlines were definitely troublesome but there’s no smoking gun here. The Portuguese problems sound like they will be contained (no guarantees) and EUR/USD rebounded from 1.3590, creating a minor double bottom and hitting 1.3608.
Cable, as usual, bounced but it finished the day down about a quarter cent to 1.7134. The low as was early in US trading as it was for most of the market. It was like an old-fashioned risk rout in the early going but turned into a more organized and manageable fear trade. Cable managed to put in a series of higher lows/highs this week and that could be an early signal of another rally.
USD/CAD finishes near the lows at 1.0648. The Canadian data was a non-event and USD/CAD moved up slightly in the early going but overall the weakness of the pair is a negative sign. The loonie is suddenly the second hottest thing in the market …
…after the New Zealand dollar, which is like a rocket ship. A slip below 0.8800 was a blip and we rebounded back to 0.8822 and within striking distance of the 2011 high. AUD/USD finishes the day down 20 pips and just below the always-magnetic 0.9400 level.
Oil finally bounced after 9 days of losses. Gold hit a three month high with some never expecting the Fed to hike again. Signs of demand in India also helping.
