Market News & Insights
22 July 2013

Market Shifts Focus to US Earnings

EUR/USD 1.3158
GBP/USD 1.5286
GBP/EUR 1.1617 (0.8608)
EUR/CHF 1.2362
GBP/CHF 1.4359
GBP/AUD 1.6587

As was the case towards the tail end of last week, we start this week with little or no data of note scheduled for release. As we stated last week “…the shift in BOE expectations and a backdrop of marginally improving data have been supportive of the pound but we have yet to see a move towards outward GBP strength…”, this trend is set to continue for now as the pound holds onto its marginal gains of last week, but it’s unlikely to move much further with reported trading volumes light and no major releases scheduled until Q2 GDP data on Thursday. Similarly, the euro is unlikely to see any major action today with the calendar for the Eurozone very light again today. The major news from the peripheral regions over the weekend was seen as euro supportive after the Portuguese coalition government vowed to battle on to keep hopes of an international bailout deal on track, despite “National Salvation” talks with the opposition party breaking down over the weekend but most importantly, President Silva ruled out any snap elections on Sunday night.

The main global news over the weekend comes from Asia with Japanese PM Shinzo Abe taking control of both houses of parliament on a strategy of economic revival. Initially, Abe’s party independently failed to secure the necessary votes but formed a majority coalition to secure control. As a result, Asian stocks rallied helping risk markets to open the week on a positive footing.
Looking ahead to later in the week, for once central banks are unlikely to be the dominate force. With Q2 earnings season in full swing, US equities are likely to be the key driver for markets with over a third of S&P500 companies scheduled to release earnings including bell weather firms like Apple and McDonalds. These reports will be supplemented by US housing data with includes existing home sales today and new home sales on Wednesday.
On the currency front EURGBP continues to trade marginally north of .8600 this morning after breaking through the big figure level on a number of occasions on Friday, hitting a low of .8591, but failing to test key support of .8576. We expect more of this range trading for the week, with a .8575 – 8680 being a realistic pattern. Both sterling and the euro open on a stronger footing against the US Dollar this morning after posting some losses versus the greenback last week. GBPUSD’s failure to break 1.5000, sees cable higher this morning at 1.5285 and similarly EURUSD’s failure to break 1.30 last week sees the pair higher this morning at 1.3150.