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Weekly Economic and Financial Commentary

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U.S. Review

New Day Yesterday

  • Subpar recovery in housing had been our expectation but this week's existing and new home sales data reinforced that the old themes of consumer deleveraging and the long-term workout for the U.S. economy remain in place. Our outlook for the second half of this year is for sub 2 percent growth and housing continuing its slow workout.
 

The Weekly Bottom Line

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HIGHLIGHTS OF THE WEEK

  • Post-tax credit U.S. home sales plummet by 27% in July, pushing inventories of unsold homes to a new peak of 11.3 months and renewing recovery fears.
  • New orders of U.S. durable goods orders rose slighly by 0.3% in Jul. Core capital goods fell by 8.0%, pointing to a slowdown in the pace of equipment and software investment in the third quarter.
 

The Week in Review

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Framed by an United States housing market in far worse shape than previously expected, an American GDP revision not quite a poor as predicted, a German economy exhibiting almost 9.0% annual growth in the second quarter and widening sovereign spreads in Europe, currency markets choose the better part of valor and kept to a narrow two figure range all week. The slowdown in trading volatility cannot last; a new narrative will emerge in September. We have already seen a preview and it depends on the intensity of the US contraction.

 

FX Strategy Weekly

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Market Outlook

Tactical view:

  • GBP: selective gains targeted on AUD, CAD underperformance

Selling rallies in pro-risk and carry trade strategies is favoured in G10 currency markets and should translate into steady demand for safe haven harbours.

 

Weekly Focus: Worries Are Intensifying

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Market Movers ahead

  • Market focus is likely to remain on the US economy in the coming week. The minutes of the most recent FOMC policy meeting could reveal important information about the Federal Reserve's decision to reinvest the proceeds of its MBS portfolio in Treasuries.
 

Weekly Market Commentary

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Overview

The rush into top-rated Treasury paper continues, new record low yields set for Swiss ten-year Conf (1.05%), Bund (2.09%), German 30-year (2.58%) and US ones (3.46%%), though Brazilian, Mexican and Russian benchmark yields are up from last week's record lows.

 

Euro Does Not Benefit from Good Eurozone Economic Data

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FX Briefing

Highlights

 

US Dollar on the Verge of Rally as Sentiment Threatens Collapse

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Fundamental Outlook for US Dollar: Bullish

The dollar stood up surprisingly well this past week because pessimism remained an indelible part of the speculative crowd’s psyche.

 
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