EUR/usd
Frankly speaking, it is hard to believe that behind yesterday's surge in the euro there was just a phrase of ECB's Nowotny about the intention of ESM to apply for a banking license. First of all, don't forget that this takes place in Europe, which means that there can be a dozen of different opinions on this issue and also some cunning term condition from Germany. In addition, even if it happens, all the possible deadlines will be already missed. The funniest thing is that the Constitutional Court of Germany hasn't decided yet if ESM's existence is in line with the Constitution, on the desirable terms. Nevertheless, the single currency has grown by half a point since Nowotny delivered his speech and today is set to continue the ascent. In fact, today growth can prove to be rather neutral. Yesterday there was a clear fixing of short positions, which follows from the sharp upward leaps and further drops. Yesterday morning we exactly mentioned that the euro looked extremely oversold in all time frames. The short-term ones look more neutral already, so the further reaction will largely depend on the news. Yesterday, for example, the decrease in the German Ifo down to 2 ½ lows went unnoticed – purchases in the euro continued. The poor statistics from the USA play right in the hands of the euro. The poorer they are the higher the probability of QE3 next week is. In June New Home Sales suddenly tumbled down to 350K against 382K a month before. Besides, the average market forecasts suggested that the index would grow by 0.7% instead of declining by 8.4%. While waiting for important news (from the USA on Friday and from the Fed next Wednesday), market players may keep taking their profits and gaining liquidity for the further move down.
GBP/USD
Having received the British GDP data for 2Q yesterday, we wrote that the pound's affairs would be bad. However, the sentiment about the dollar was negative and therefore didn't allow GBP/USD to go down. The weakness of the pound is especially obvious against the euro. There we could also see the massive profit taking yesterday. Since the beginning of the week EUR/GBP has grown by a point, which is not bad for such a low liquidity pair. The British economy lost 0.7% in the second quarter. Besides, production shrank by 1.3% and the service sector lost 0.2%. The production has been slowing down for 6 quarters on end. And with such an expensive pound we can well expect that this won't be the last quarter of decline. Against such a background it won't be surprising if we face further decrease in the sterling. One of the European safe havens is getting rippled.
gold
Yesterday's upward move in the markets was unexpectedly caught up by Gold. The American premarket was especially active as to purchases in Gold. On the growing expectations and then on the factual launch of QE3, Gold may again find new buyers. There won't be many investors who will be unwilling to buy fiat currencies.
NZD/USD
The RBNZ kept the Official Cash Rate unchanged at 2.5%. The accompanying commentary stated that the main threat to the New Zealand economy is rooted in the external risks now: the slowdown in major trading partners and “the limited exposure to the sharp deterioration in the euro zone”. In regard to the internal market comments, however, were rather optimistic: according to the forecasts the economic activity and housing market keep growing. Yet, New Zealand remains under the pressure of fiscal consolidation and growth of imports, caused by the high rate of the New Zealand dollar.
