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Sample analysis - Daily market analysis June 14th 2007
Key economic releases over the next 24 hours
| Time (GMT) | Data release/event | Previous | Consensus |
| 12.30 | US producer prices (headline) | 0.7% | 0.6% |
| 12.30 | US producer prices (core) | 0.0% | 0.2% |
| 12.30 | US jobless claims | 309,000 | 315,000 |
Key factors to watch
The US producer prices data should not have a major impact unless there is a big fluctuation in core prices.
Movements in bond yields and stock markets will remain very important over the next 24 hours.
The extent of carry trades will continue to be a key market factor.
09.00 AM GMT Overall strategy: Yield trends are likely to remain dominant in the short term and the dollar should be able to retain a firm stance even though resistance levels will become tougher to break. There are still substantial risks associated with carry trades and overall market volatility is likely to increase.
Hedging/longer-term recommendations for the next 4 weeks
| Currency | Spot | Recommendations | Recommendations |
| EUR/US$ | 1.3305 | Reduce long dollar exposures/buy Euro at 1.3250 | Reduce long Euro exposures/buy dollar at 1.3650 |
Bold figures indicate changed levels
Market analysis
Overall confidence in the US economy should persist in the short term following the robust retail sales data. The dollar should also gain support from interest rate considerations given the improvement in yield spreads over German bunds. Yields may, however, have peaked on a short-term view which will limit the scope for strong dollar buying. There is also likely to be renewed unease over the US housing sector as higher yields will cause renewed stresses in the mortgage sector. The US resistance levels will also become tougher to break, especially as underlying central bank dollar selling is liable to increase. The Euro will remain vulnerable to some further position adjustment in the short term, but should be able to find good support close to the 1.3260 level with underlying consolidation realistic over the next 24 hours.
The dollar pushed to 11-week highs near 1.3260 against the Euro on Wednesday. Subsequently, the dollar retreated and consolidated near 1.33 despite firm US figures. The dollar was holding close to 1.33 in early Europe on Thursday with buying interest close to 1.3315.
The US retail sales data was stronger than expected with a 1.4% monthly increase for May after a revised 0.1% dip in April while there was a 1.3% underlying increase. Sales were elevated by strong gasoline sales, but underlying demand was also still firm with gains in building-related sales.
The Fed’s Beige Book reported that commercial real-estate was generally strengthening, but there was still weakness in the residential sector. The evidence of tight labour markets was offset by the fact that pricing pressures were contained.
There was high volatility in US Treasury markets on Wednesday with a sharp initial increase in yields to near 5.3% for 10-year bonds reversed later in US trading. Yields have still increased strongly over the past few weeks which will provide significant dollar support, especially as spreads over German bunds remain higher.
Higher interest rates will also cause renewed stresses in the US housing sector which is likely to curb strong dollar buying support. There is also the potential for central bank US currency selling at elevated levels which will toughen dollar resistance levels.
Disclaimer: Investica's market analysis is not investment advice and must not be taken as recommending particular market positions. Investica can take no responsibility for any actions taken by investors.