2010-07-28 09:39

XTB market snapshot

US might spend less…

The US Conference Board sentiment index might have not slipped much more than expected (50,4 pts. vs. expected 51) but it’s shouldn’t be perceived as a consolation. The index fell for two straight months, just when it looked (during the spring) as if consumers might shift the higher gear and propel the private demand. Meanwhile, the index returned to the levels already in place in the summer’09 which simply shouldn’t happen during the recovery.

…but China will do more

The US data served as a blow to the equity markets with the Dow contracts trying to move above the resistance of 10530 pts. before the release on the decent earnings picture. The macro data could have been a good reason for a profit-taking but this process was halted during the Asian trade on comments from the Chinese finance minister. Xia Xuren said he saw no serious risks of the double-dip yet he underlined the Chinese authorities were about to keep stimulus in place at least until the year end. Even if the Chinese discretionary fiscal policy might be questionable in terms of efficiency, more public spending mitigates the risk of a sudden slowdown in China which actually was becoming a concern.  

Cable shoots up, euro waits

Upbeat sentiment on the global market servers as a support for the major European currencies vs. the dollar. However, since the begging of the week, GBPUSD and EURUSD were constrained by some serious resistances. The cable managed to shoot above 1,5520 with a convincing daily white candle and therefore might eye the level as high as 1,5820 – a local peak from Feb 17^th and at the same time the minimum from December 2009. However, one should watch the EURUSD and the Dow contracts which failed to move above their respective resistances (1,3050-1,3120 and 10530 pts.). A correction on those instruments would be negative for the British pound and could well change the picture on the cable.

Events to watch – orders in US, rates in New Zealand

Durable orders (8.30 ET, 14.30 CET, exp + 0,9% m/m, +0,6% m/m for core) still benefit from the huge base effect and therefore will likely turn up at around 18% y/y. However, investors are interested how the dynamics is going to look like when these statistical effects starts to fade. Given a subpar consumer sentiment, it doesn’t look too optimistic. Bank of New Zealand is expected to lift rates for the second time by 25 bp during the Asian session (5.00 PM ET, 23.00 CET).

Przemysław Kwiecień
Chief Economist
X-Trade Brokers Dom Maklerski S.A.
Przemyslaw.kwiecien@xtb.pl

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