- Strong earnings reports boost risk appetites, catch market short EUR/USD after Portugal downgrade.
- US trade deficit widens to $42.3 bln in May
- Uncertainty over what stress test results to be published on July 23
- German banks said to pass stress test; sources
- Greek sovereign debt to take 23% haircut in stress test
- Fitch downgrades Spain’s Banco Popular
- Spain asks EU to extend bank recapitalization plan
- Fed’s Rosengren frets over deflation in WSJ
- Fed’s Hoenig; Growth less robust than though but should still hike rates
- US sells $21 bln 10-year notes at 3.119%; bid to cover 3.09
- S&P 500 closes up for 6th straight session; up 1.5% to 1095
- US 10-year note climbs 7 bp to 3.12%; oil up 3% to $77.25
Risk-on.
That’s pretty much all you need to know today, but in the process of soaking up risk assets across the markets, traders did some serious technical damage to the EUR/USD downtrend. In fact, they broke it and are closing above it. Trendline resistance came in at 1.2677 today and we jumped above that level and soon after,trend highs at 1.2723, reaching 1.2739 as London scrambled to square up. Many in the market were caught on the wrong foot by the rally, having sold earlier in the day on the downgrade of Portugal. Heavy selling from a Middle Eastern account helped cool the rally a touch in the afternoon.
USD/JPY fell victim to profit-taking this morning despite the uptick in risk appetite. USD/JPY just couldn’t rally, prompting longs to offload a portion of their positions, dropping USD/JPY to 88.02 before it stabilized. It rallied after the wash-out and ends the day at 88.50. EUR/JPY edged up to 112.50.
Cable benefited from firm CPI data this morning in the UK. Inflation remains stubbornly high despite slack resource utilization. While the BOE probably won’t hike, it sure won’t resort to any further QE anytime soon.
Commodity currencies rallied during the US session but in somewhat muted fashion. It feels as though the market may have built up a pretty significant long position in commodity plays.
Strong Intel earnings could keep the market humming overnight…
