Market Drivers for May 27 2014
- Dollar a bit weaker in Asian and early European trades
- UK BBA loans miss
- Nikkei 0.23% Europe -.09%
- Oil $104/bbl
- Gold $1284/oz.
Europe and Asia
JPY: Japan CSPI 3.4% vs. 3.3%
CHF: Employment 4.19M vs. 4.21M
GBP: BBA Mortgages 42.2K vs. 45.2K
North America
CAD: Corporate Profits 8:30
USD: Durable Goods 08:30
USD: Consumer Confidence 10:00
It’s been a very quiet session of Asian and European dealing with both London and New York just coming back to their desks after a long holiday weekend. The dollar weakened a bit in Asian session trade, but both the pound and euro gave up most of their gains, while the comm dollars were slightly better bid amidst very little newsflow.
In the UK, the BBA mortgage figure missed to the downside printing at 42.2K versus the 45.2K expected, confirming the recent slowdown trend in UK housing demand. The news sent cable back to session lows of 1.6840 after the pair traded as high as 1.6881 in the Asian session trade.
The decline in UK housing demand provides BoE policy makers with more time to normalize rates as the pressure from asset classes eases. Nevertheless, Charles Bean the retiring deputy governor with responsibility for monetary policy, predicted Sunday that UK rates are likely to rise to 3 percent over the next three years as the BoE adopts a “baby step” approach to tightening monetary policy.
Although the focus in the UK remains on tightening, the story in the eurozone is all about easing. Today, all eyes in the currency market will be turned to Mario Draghi who is speaking for the second day in a row at the ECB forum on central banking. The ECB President hinted yesterday that the central bank is ready to move on rates, but today traders will look for clues as to whether the ECB will also create a new program to buy Asset-backed Security (ABS) debt in order to help spur lending in the region.
Experts remain divided about the feasibility of securitizing small and medium company loans, but European monetary policy makers are clearly concerned about the lending transmission mechanism in the region and hope that an ECB sponsored program would create a unified and centralized market for bank loans that would help jump start economic activity in the region.
In North America today, the calendar is subdued with only Consumer Confidence and Flash PMI data on the docket. Indeed, this whole holiday shortened week may be extraordinarily quiet as the markets prepare for much more important event risk next week that includes the ECB meeting and the NFP report.