Intraday Market Thoughts

Progress on Debt Ceiling, Bernanke Dampers QE3 Enthusiasm

by Ashraf Laidi
Jul 14, 2011 23:36

Broadly negative sentiment continued on Thursday as US lawmakers scramble to raise the debt ceiling. Overall moves were small; NZD and GBP led while AUD and JPY lagged.

In the second day of testimony from Bernanke he told Congress that the Fed wasnt "at this point" prepared to take further action on the economy. He also warned lawmakers that a failure to raise the debt ceiling would be "calamitous." His comments weighed on stocks and that pulled EUR and the commodity currencies lower. The S&P 500 fell 0.67% to 1309.

Sentiment was buyoed somewhat on talk that US lawmakers are getting close to a deal on the debt ceiling. Scattered reports suggest Republicans and Democrats have agreed to $1.5 trillion in spending cuts.

Economic news did not have a large impact. US June retail sales rose 0.1% compared to the 0.1% decline expected. Excluding autos, however, the numbers were disappointing. Initial jobless claims improved to 405K from 427K and beat the 415K consensus.

Forex market action was less volatile that earlier in the week. EUR/USD ranged from 1.4270 down to 1.4120 and closes the day mostly unchanged at 1.4140. Gold hit a record high of $1594 in Europe but slumped somewhat in North America.

Ashraf has returned from travel and shall unveil several new premium trades at approx midnight GMT.


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