US Dollar gave back most of the gains it made on the back of the Non-Farms number. Investors took caution from president Obama’s words at the G7 press conference, where he said that Dollar strength could be a problem. He later denied the remark, but the horse had left the stable by that time.
The Dollar’s fall against the euro was helped by a respectable German industrial production number, which showed growth of 0.9%. The number is the first decent reading in the last three months and was readily taken as a sign that Germany’s economy might be pushing out of a relatively benign period – good news for Europe and the euro.
From Greece, there is talk of extending the bailout until March next year. The Wall Street Journal is reporting that a nine month extension is on the cards in a bid to break the current deadlock and allow both sides ‘more time to chart a new path for Greece’s economy’. The market will breathe a short term sigh of relief if this turns out to be the case, but adding another nine months onto a problem that has taken 5 years not to solve is beyond ridiculous.
Elsewhere in the world, Turkey’s election problems from the weekend led to a wider spread sell off in emerging markets. Yesterday the Lira lost 5% in value and Turkey’s stock market was the worst performer in the world. This contagion spread through to other emerging markets, as traders worried about higher US rates and got a reminder of the problems of less than sable political leadership.
Overnight we’ve seen National Australia Bank (NAB) Business Confidence come out better than expected but wasn’t able to move Mr. Aussie much, mainly because Chinese CPI came in at 1.2% versus 1.3% expectations. UK retail sales come out flat against last month, after expectations were for a fall – this is good news and shows that the warm weather that boosted sales in April didn’t hamper May’s purchases. During London Session UK trade balance came in at -8.6B better than -10B.
Pretty much a light economic calendar ahead for the rest of the week with Aussie dollar in focus. For more shakes on the forex dance floor is expected next week with the FOMC data.