Though James Bullard is not a voting member of the Fed now, he is still concerned with the Committee's inside. For this reason his comments that fomc could start increasing the rates earlier than expected by the market stopped the US dollar from falling in the morning yesterday. And then the almost forgotten fear again fell upon the markets, the fear about Europe's ‘troubled' countries and their financial sectors. The second largest bank of Portugal aroused particular concerns around its solvency, as Espirito Santo International, a shareholder of Banco Espirito Santo SA, missed short-term debt payments. It immediately stirred concerns about a possible chain of troubles with the financial companies and put pressure on the market in general. The ascent of the euro/dollar was stopped on the way to 1.3650. The pair found support only at 1.3600, where it keeps consolidating now. Since there's no important news scheduled for today, the market participants can get fully absorbed in studying this story. It can provoke both a new round of usd selling since the financial sector generally remains protected and another tide of decline in indices from the current high levels due to the increased caution. Against such a background last week's reduction of the US unemployment claims passed almost unnoticed. They shrank to 304K, which is the third lowest rate of the index in the last two months and in the post-crisis period in general. Yet, the number of continuing claims has already been climbing up for three weeks in a row.
GBP/USD
The sterling as usual is very sensitive to the news on the health of the banking sector. On the release of Portugal's news the cable fell from 1.7160 to 1.71, yet by the end of the day over a half of the losses had been offset. Besides, the market participants didn't pay any attention to the BOE's interest rates, since there were neither any change nor any comments. Again it will be of more interest to study the meeting minutes and watch the market's reaction than to deal with the interest rate decision.
USD/JPY
The demand for safe assets helped usdjpy get out of the traded range. Anyway, we have already seen the pair go beyond our bounds (101.20-102.75), but get back within them soon. This may change soon. But with time we are getting less and less sure that it will be in the upward direction. Fundamentally, it should be so, but at the same time we see the growing unwillingness of the Japanese government to maintain the current pace of reforms. Now they suppose that the already taken measures are enough to put the economy on the track of the stable economic growth.
USD/CAD
The Loonie players were obviously trying to take profits after the currency's growth at the beginning of the week. Now usdcad has returned to the level of consolidation recorded since the beginning of the month. Approximately here was the centre of consolidation at the end of the preceding year. Today we expect important statistics – on the situation in the labour market in June. These data in case of a sharp deviation from the forecast (7.0% and employment growth by 26K) can prolong the rally of the Canadian currency, but also can sharply reverse the trend. Should it be so, we will be more disposed to buy the pair.
