Intraday Market Thoughts

Germany Cools ECB Speculation, China PMI Up Next

by Adam Button
Aug 1, 2012 0:39

Euro extended higher on Tuesday despite German warnings that Draghi may not deliver a decisive blow that reverses the crisis. The euro was the top performer on the day while the pound lagged. The official Chinese manufacturing PMI is the highlight of Asia-Pacific trading. Details on the existing Premium trades are below.

Even with the FOMC decision a day away, all eyes remain on Europe and what the ECB will deliver on Thursday after Draghi said trust me, it will be enough to preserve the euro.

The ECB leader was meeting with hardliners in Germany in an attempt to reach consensus but the tone of todays comments suggests that point has not been reached. An unidentified official from Germanys central bank told CNBC the ECB should stick to price stability, implying that it is against bond buying. A German finance ministry official was also quoted saying there are no talks about granting the ESM a banking licence.

Separately, a report from Bloomberg said Spain has struck a deal with Germany that will ensure aid in the bond market for a fresh set of reforms.

Through it all, the euro marched 50 pips higher to 1.2330 in US trading before edging back to 1.2295.

US economic data showed some bright spots as the Chicago PMI, the Case-Shiller home price index and consumer confidence figures beat estimates. Congressional leaders also agreed to extend spending measures beyond the fiscal cliff until March, leaving tax rates as the lone battleground.

At 0100 GMT, China will release its official July manufacturing PMI. The consensus is 50.5 after a 50.2 reading in June. The HSBC flash reading was strong at 49.5 compared to 48.2 in June so there may be a slight upside bias priced in.

At 0130 GMT, Australia releases second quarter house price index figures expected to show a 4.2% y/y drop in prices.

Our latest Premium Insights have 7 new trades, 2 in progress and 6 all hit from Thursdays edition. New trades are in EURUSD, USDCAD, AUDUSD, Gold and Silver. 3 charts on EURUSD, AUDUSD and Silver. Click here for direct access: Non Subscribers can click here:



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