It is going to be a huge 24 hours with the release of the advance estimate of US Q2 GDP and the FOMC decision.
Looking first at the GDP – which is going to a monster number for the Euro – the market is expecting an annualised outcome of a massive 3% for Q2 according to the economic calendar. There is a lot of implied give back from the weakness in Q1 in that expectation of a 3% growth rate.
So there is a risk to Euro shorts and US dollar bulls.
Euro is either going to find support here at the 200 week moving average – or break wide open.
In terms of the FOMC the taper will continue but the expectations of Fed governors about when rates will move is the big question. Watch out for that dot scatter plot – I’ll cover it in the morning.
Back to overnight moves and there was late breaking news this morning that the EU has finally put some decent sanctions on Russia aimed at putting pressure on President Putin’s inner circle and through them him. The US has upped the ante as well.
In a market sense it just adds pressure which gives further impetus to the US dollars recent move higher but also increases uncertainty which helped US stocks swoon into the close.
The Dow finished on its low for the day off 71 points or 0.42% at 16,912. The Nasdaq fell back from its intra-day recovery and finished near the lows but down only 0.04% at 4,443 while the S&P 500 finished down 0.45% at 1,970 for a fall of 9 points.
On the data front overnight Case Shiller price rises continued to moderate, up 9.3% year on year in May from 10.8% last. Consumer confidence was strong however at 90.9 from 86.4 last.
European markets were closed when the sanctions were announced and finished in the black – a situation likely to be remedied in futures trade during our day and when the markets open this afternoon Asian time. At the close the FTSE was up 0.29%, the DAX was 0.58% and the CAC rallied 0.49%.
For indices traders, ASX Futures markets overnight it was a decent range for the SPI 200 which traded through 5536-5561 but this morning it is at 5539 unchanged on the night. Iron ore was up again overnight so the miners might have another good day.
Clearly 5600 on the physical and 5558/60 in SPI terms remain very solid resistance for the local markets.
Asian stocks had another solid day yesterday with the Nikkei up 0.57% as the USDJPY rallied (Yen weakness) closing at 15,618. The Hang Seng rose 0.87% and in Shanghai stocks rose 0.23% to 2,183.
As noted above on currency markets it is about the US dollar and its strength as the Euro makes new lows for 2014 at 1.3402 – it is a little higher at 1.3409 at the moment. CPI in Germany tonight is a huge number for the Euro and expectations about what the ECB might do and of course further discussion about Russian sanctions and their impact will be of interest to traders.
Sterling continues to unwind recent strength and is at 1.6943 this morning while the jump in the Japanese unemployment rate (even if just to 3.7%) along with the lower than expected rise in retail trade in June of 0.4% put the Yen under pressure and USDJPY is back above 102 at 102.09 this morning.
The Aussie is drifting lower on the back of US dollar strength but holding in well at 0.9385.
The Aussie is going nowhere really – drifting – but for how long?
On commodity markets iron ore September 62% Fe swaps rose 62 cents to $95.75 tonne while Newscatle coal also rallied, although by the tiny margin of just 5 cents, with the September futures settling at $70.35 tonne.
August Nymex crude fell another 77 cents to $100.90 Bbl while gold sits at $1,310 oz with silver at $20.58. Copper was 2 cents lower at $3.21 lb while the Ags were at it again with big falls. Wheat dropped 2.76%, corn fell 1.70% and soybeans were 0.81% lower.