While European markets remain some way away from their recent highs the stickiness of US markets continues to surprise, as once again we saw a record high, this time from the Dow Jones as US investors shrugged off last week's concerns about slowing growth in Europe
to finish the first day of a key week for earnings, virtually erasing most, if not all of last week's losses.
Despite this positive finish in the US today's European session looks set to open slightly lower this morning
as doubts about the prospects for a strong recovery in Europe hold investors back.
The likelihood is that European markets will continue to lag behind US markets while concerns about the recovery in Europe continue to weigh on sentiment
Yesterday's disappointing EU industrial production data for May merely underlined what we knew from last week's individual component readings, and raising the prospect that Q2 GDP could actually be negative in a lot of individual cases.
Today's latest German ZEW investor sentiment survey for July
is not expected to make for pleasant reading given recent sharp declines in the DAX
in the past month, with a decline to 28.2 from 29.8 expected, and the lowest reading this year, and the lowest since December 2012.
Market focus today is also likely to be on two central bankers
, namely Bank of England governor Mark Carney and Fed chief Janet Yellen as they both speak to respective policymakers about the prospects for interest rate policy and financial stability over the next few months.
Before that we have the latest UK inflation data
and we don't expect too many surprises here with CPI expected to nudge higher to 1.6% in June,
while retail prices are expected to do the same, rising from 2.4% to 2.5%. UK house prices for May are expected to edge higher to 10.1% from 9.9% in April.
Mr Carney could well be quizzed about the prospects of a rate rise
, however given recent disappointing economic data the pressures for an imminent rate increase appear to be diminishing slightly, and are likely to remain an outlier while average wage growth numbers, due tomorrow, continue to lag well behind inflation.
The US session is likely to be dominated
by the latest semi-annual testimony by Fed chief Janet Yellen to the Senate
with some in the markets expecting a somewhat less dovish outlook after the jobs numbers we saw in June
, and increasing concerns about rising inflation, in the form of CPI and PCE.
This expectation could well be misplaced
despite recent hawkish comments from other Fed members. The Fed chief has consistently maintained that she is prepared to look past transient rises in prices until there is more evidence of a sustained recovery, and it would be a surprise if she deviated from this narrative.
The data seen thus far in Q2, aside from the jobs numbers, hasn't exactly been great and today's retail sales data for June is expected to show a rise of 0.6%,
an increase from 0.3% in May, which would put net retail sales growth for Q2 at 1.4%. That puts it behind the net retail sales growth of 1.5% seen in Q1, and we saw GDP contract 2.9% in that quarter.
is expected to slow a touch in July, from 19.28 to 17. Ultimately today's move in US markets is likely to be determined more by what Yellen says than how good or bad today's data is.
– still in the overall uptrend since the 2012 lows. The broader range remains intact and while we hold above the 1.3500 level, the risk of a move back towards 1.3700 remains more likely. The key support remains at 1.3495 where we have trend line support from the 2012 lows.
– the pound looks as if it could be building up for a move lower towards 1.7040 initially, and possibly as low as 1.6910. Only a move above 1.7180 would undermine this scenario and run the risk for further gains towards 1.7330. 1.7330 is the 50% retracement of the decline from the 2007 highs at 2.1160 and the lows at 1.3500 in 2009. Only a move below 1.6910 support delays the scenario above.
– yesterday's move above the 0.7960 area could well open up a move towards 0.8000 initially and then on to trend line resistance from the March highs, coming in at the 0.8035 area.
The pressure remains on the downside, and move towards 0.7880 while we remain below this trend line.
– slipping below 101.80 keeps the broader range intact as we continue to play the range between 101.20 and the range highs just below 103.00. Intraday resistance sits at 101.80.
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