European yields continue to rise as we await UK GDP and German IFO this morning
City Index July 25, 2012 7:16 PM
<p> EUR/USD Range: 1.2053-1.2079 Support: 1.2000 Resistance: 1.2150 The physiological 1.2000 level is now in sight as the Eurozone’s woes intensify with government yields […]</p>
The physiological 1.2000 level is now in sight as the Eurozone’s woes intensify with government yields rising to record levels and rating agencies warning that financial commitments associated with support for stressed eurozone sovereigns threaten the credit fundamentals of stronger members such as Germany. EU officials commented yesterday’ Greece seen missing EU/IMF debt reduction targets’ and with the September deadline looming for the next bailout tranche things look very bleak indeed for Athens. The WSJ reported the FED could announce QE3 as early as next week as FOMC members become frustrated with the lack of economic improvement. although market reaction was muted.
Range: 1.5488 – 1.5512
The pound still trades in summer ranges with EUR/GBP still under pressure with Spanish 10-year bond yields rising to a record high of 7.69% this morning. The main event for the UK will be released at 9.30am this morning with the second quarter GDP forecasted to show a contraction of 0.2% slightly improving from the previous quarter of -0.3%. I’ll use a weaker number to sell a EUR/GBP rally to 0.7900.
Inflation data in Australia confirmed what RBA governor Glen Stevens has commented yesterday that CPI would be at the lower end of the Central Banks target of 2-3% with Q2 inflation declining to 2% from 2.2% in Q1 with the lower reading giving the RBA the green light to cut rates further if the global growth picture doesn’t show signs of improving. The Lifestyle currency initially dipped just below 1.0180 before a bout of short covering squeezed the market back above 1.0200.
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