Oil prices are below $112 this morning as Tropical Storm Fay proved to pack less punch than feared. Production impacts on the Gulf of Mexico should prove modest. The buck has benefited from the oil drop but is off its bets levels of the session after making modest new trend highs ahead of improved ZEW data. Looks like the drop in energy prices may be boosting German spirits as they have in the US.
A big drop in the Nikkei overnight had the usual impact of prompting safe-haven flows back into JPY. With Japanese investors net exporters of capital, when they get jittery, they tend to bring funds home.
Housing data is the early focus in the US this morning. Expect a pullback as home builders work off big inventory overhangs.
