- US durable goods orders rise 1.6% in June, largely confined to aircraft; core capital goods orders fall 1.4%
- US initial jobless claims fall to 353,000 from 388,000; faulty seasonal adjustment again suspected
- US pending home sales fall1.4% in June, weaker than expected
- 30 year mortgage rates fall to record low of 3.49% in US
- IMF to publish Spain’s article IV review on Friday
- Spanish 10 year yields drop back below 7% after Draghi comments
- Greek PM: Will proceed with bailout accord
- Barroso: Greece has clear commitment from Europe
- Ireland makes tentative return to bond markets with 5-year sale
- US 10 year note rises 3 bp to 1.43%
- S&P 500 rises 1.7% after Spain and Italy rally more than 5% each
EUR/USD extended the gains set in motion by Draghi’s muscular defense of the euro, saying the ECB will “do whatever is necessary to preserve the euro. And believe me, it will be enough”.
Short-covering took the pair above resistance at 1.2325, triggering stops before topping out at 1.2330. Afternoon dips were limited to 1.2275.
Draghi has set a high bar for ECB action. If he does not deliver at the August ECB meeting next Thursday, the euro will resume its slide. Reviving SMP, another LTRO or potentially granting the ESM a banking license are some of the options on the table.
Cable rallied even more viciously than EUR/USD with the market heavily short after the horrible GDP data earlier in the week. It soared to 1.5723 from 1.5500 after Draghi spoke.
Covering of EUR/AUD and EUR/CAD helped limit the rallies in the commodity currencies to some extent. AUD/USD regained 1.04 for a time and closed the day at that level. USD/CAD ends around 1.01.
