Risk rally phased out in yesterday’s trading bringing the Dollar up against all of the currencies I exception for the Japanese Yen. In overnight trading, the Euro continued to slip lower, while other higher beta currencies followed suit.
The markets will pay a close attention to the Pound today. The harshest set of budgetary cuts and other reduction in incentives to the public, in order to close a budget gap will be implemented by the British government today. In a time when large fiscal debt is frowned upon, the reduction in debt may be looked well upon. However, prior to the event the Pound escalated from $1.43 to $1.47 over a last weekend, letting us question how high will the Cable head. The reaction of credit agencies will be the catalysis of movement in the currency.
The Germans managed to cut roughly €20 Billion in budget deficits this year as higher taxes and lower cost of unemployment benefits will help close the gap. German IFO survey printed a much better than anticipated figures, however without any affect on the market. June Business Climate climbed to 101.8, while Current Assessment managed to climb to 101.1 beating anticipation of 99.8. However, the broader followed gauge, Expectations dropped to the downside, possibly explaining a lack of positive bounce. Expectations underperformed at 102.4 versus anticipated 102.7.
Consumer Prices in Canada dropped to 1.4% from previous reading of 1.8%. Lower price of inflation does not seem ideal right now and possibly the markets will double guess the upcoming interest rate decision.
Trade Balance in Switzerland moderated to 0.82 Billion in May; however, the country continues to print positive figures. Positive trade balance has played out in the favor of the Swiss as unemployment remains relatively low and the country is adding growth.
Today’s economic data that is watched by the traders will be EU Consumer Confidence, US Existing Home Sales, Geithner’s Speech, and HPI (Housing Price Index).
Disclosure: Long on AUD/USD