Global equity markets are in a state of déjà vu this morning, with another strong rally during the overnight Asian session unable to see its optimism filter through to North American equity futures. The Shanghai Comp posted a sixth consecutive day of gains as the index rose by 0.24% creating a parabolic-like chart of price action over the last week, while the Nikkei jumped by 0.57% as a result of a weaker Yen helping to boost the value of export-intensive companies. The Yen has been flirting with the 102 handle against the USD for most of the overnight session, with the upward momentum in the pair being spurred by disappointing economic data releases which showed the retail tax hike did indeed crater economic performance of the Japanese economy in Q2. Consumer spending managed to stanch some of its bleedings on a y/o/y basis for June with a decline of only 3.0% after the 8.0% decrease in May, yet the unemployment rate over the course of June jumped from 3.5% to 3.7%, showing the effects of slack demand on the labour market.
Turning our attention to the UK, the Pound is battling with the Kiwi to be top spot for underperformance across the major currencies this morning, reacting in a negative fashion to an IMF report that stated Sterling was ‘moderately overvalued’ and that the BoE should be ready to seek other policy responses should macro-prudential measures fail at cooling an overheating housing market. After the IMF report was released, mortgage approvals for the month of June in the UK hit the wires, and showed that while the monthly number of new mortgages had eased from earlier in the year, the 67k that was reported was far above the median estimate of economists, and a sharp jump from the 62k registered last month. GBPUSD has slipped into the mid-1.69s as a result of the concerns surrounding the IMF report, with the pair continuing to grind lower as we head into the North American open.
Getting set for the opening bell in North America, equity futures are modestly positive, trying to build off yesterday’s rebound that saw stocks retrace their earlier losses to finish the day essentially unchanged. The DXY has seen momentum underpin upward price action for the index, looking to make a run at the highs witnessed earlier in the year as the USD currency basket rips into the low 81s. Treasury yields are slightly softer this morning as the 10-year declines to 2.45%, though the bid in fixed income has not affected either the USD or equities. The Loonie is also struggling against the USD like most of the other majors, with supportive bids for the big dollar stemming any jaunt of USDCAD through the south-side of the 1.08 handle. For the second day in a row another light economic calendar will be called upon to dictate price action, with the main focus being Consumer Confidence in the month of July dropping at 10:00EST. Even then expectations are for the survey to remain essentially flat for the month, with just a slight increase from the 85.2 registered in May, although that is the highest reading since early 2008.
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