Overview: July 11, 2014 Currency and financial markets stabilized as worries about new debt problems in Europe abated. For the greenback, that resulted in a steady tone and helped it recover from seven-week lows touched the previous day against the yen. The situation with one of Portugal’s biggest banks remains precarious, though, suggesting the current calm in markets may only be tentative. Going forward, the euro should serve as a barometer of investor confidence in Europe’s banking sector. Worries about a potential new chapter in Europe’s debt crisis gave the dollar a general lift on Thursday, as it dimmed the spotlight on Federal Reserve’s low-rate stance for the foreseeable future. Minutes this week from the bank’s previous meeting signaled an October end to bond buying stimulus, but offered little clarity on when it might boost interest rates from all-time lows. The case for an eventual Fed rate hike got a boost in Thursday U.S. jobless claims which were near the fewest in years. The euro idled just above $1.36 against eth greenback while Canada’s loonie held resilient in the $1.0630s ahead of today’s local jobs report. A busier week ahead features Fed chair testimony on Capitol Hill, and data on the U.S. consumer and manufacturing. EUR The euro stabilized after a fall Thursday below $1.36 against the greenback and to multi-month lows against the safer Japanese yen. The euro potentially has a lot to lose should the recent troubles with one of Portugal’s biggest banks develop into a full-blown crisis. For now, though, a tentative calm has washed over markets, allowing the euro to catch its breath. Helping improve the market tone Friday was an assurance by Portugal that is banking sector was sound. The full extent of the troubles afflicting the Portuguese bank, Banco Espirito Santo, have yet to be made known. The interim uncertainty is likely to keep in place a lower ceiling above the euro. Looming in the week ahead for the euro will be headlines on Portugal and data on euro zone factory output (Monday) and inflation and the current account on Thursday and Friday, respectively. Germany on Tuesday will release its key ZEW survey of investor optimism. JPY The yen edged away from fresh highs as markets stabilized following a bit of a rout the previous day on worries about a potential reawakening of Europe’s debt crisis. The rush for safety even overshadowed poor data from Japan that showed machinery orders, a notoriously volatile data set, plunged some 19.5 percent in May. As market players sought safety they piled into safer U.S. government bonds, sending prices higher and yields lower. A leading positive for the yen is when American bond yields fall, which can entice the Japanese investor to keep money parked at home. Japan on Monday will publish a revised report on area industrial output for May. CAD The loonie weakened to session lows above 1.07 after a jobs data miss suggested its recent resilience was unwarranted. Canada unexpectedly lost 9,400 jobs in June while unemployment increased to 7.1 percent from 7 percent. Forecasts had called for a net gain of 20,000 jobs and an unchanged jobless rate. Canada did add 33,500 of the more meaningful and better paying full-time jobs, but that wasn’t enough to offset the loss of 43,000 part-time positions. The disappointing jobs report should result in fewer people expecting the Bank of Canada on Wednesday to sound hawkish. USD The dollar rebounded from seven-week lows against the yen as market risk aversion abated on reassuring words from Portugal on the shape of its banking sector. That caused the dollar to return to its recent sideways trading pattern. In the coming week market attention will shift to Fed Chair Janet Yellen who will talk about American monetary policy on Capitol Hill on Tuesday and Wednesday. Markets will use her remarks to try to fine tune forecasts for when a Fed rate hike might come. U.S. consumers will also be in the spotlight next week with retail sales due Tuesday, followed by consumer sentiment on Friday.
Posted on: Fri, 11 Jul 2014 15:02:35 +0000
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