Euro remains Firm Despite Trichet Dovish Tone
Euro remains resilient despite Trichet comments in reviewing price stability, Japan retail sales, Australia Building Approvals, FOMC minutes
Yesterday’s comments by Trichet that the ECB is reviewing the risks to price stability, failed to dent the single currency, which is somewhat surprising given that reading between the lines, could well suggest that any further rate rises could well be off the table in the near future. It could well also mean that the next move in rates could well be lower, given the problems in southern Europe. The euro also received a boost after EU officials rebuffed IMF chief Lagarde’s call for bank recapitalisations, saying that they were unnecessary.
In economic data released later this morning Euro zone consumer confidence for August is expected to remain in negative territory at -16.6 while Italian retail sales are expected to rise 0.2% for June.
Italy also stays in focus as it looks to issue €8.5bn worth of 3,7 and 10 year bonds as its yields start to creep higher again.
Japanese retail sales for July continue to pick up as the country continues its long climb out from the after effects of the March earthquake and tsunami. Large retail sales rose by 0.8%, reversing the 0.5% decline in June, while household spending while still declining is recovering after May’s 4.2% decline, declining 2.1% against an expectation of a decline of 2.9%. Japanese unemployment also rose more than expected to 4.7%.
Finance minister Yoshihiko Noda looks set to become the next Prime Minister of Japan as he looks to take on the poisoned chalice of problems of the Japanese economy that have eluded five previous incumbents, over the last five years.
Building approvals in Australia improved slightly in July after June’s 3.5% fall, rising 1% but they were below expectations of 2%. The figures for July showed a year on year decline of -15% suggesting high interest rates continue to weigh on the sector.
Later this afternoon the minutes from the August FOMC meeting are expected to give further details on the extent of the splits on the committee and the level of opposition to further stimulus measures.
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