FX Weekly Report (20/07/2012) Spain's liquidity issues dent market confidence (page 2 of 2)

Earlier in the week, the headline US retail sales figure came in much weaker than expected at -0.5% (Exp 0.2%, Prev -0.2%) and was the third consecutive monthly decline.








Despite news from Spain, sluggish retail sales and the lack of action by the FOMC, US stocks traded positively for the majority of the week thanks in large part to a solid start to the Q2 US earnings season. Some of the key earnings reports included Citibank who announced an EPS of 0.95 cents which trumped analysts expectations of 0.89 cents per share. Similarly, Bank of America announced an EPS of 19 cents per share, better than analysts' estimates of 16 cents a share. And finally, market heavyweight Google announced a net income of $2.79 billion ($8.42 per share) well above the $2.51 billion ($7.68 per share) for the same period a year ago.













Elsewhere around the globe, the International Monetary Fund downgraded their global growth forecasts for 2012 from 3.6% to a revised 3.5%. The Bank of England released their meeting minutes this past week, and amidst the 7-2 voting split which led to the £50 billion increase in the asset purchase target, the bank announced that they would be open to reviewing UK interest rates in the future. The GBP immediately weakened following the announcement but was quick to recover to close the week marginally higher at 1.5620 (+44 points) against the Greenback. The LIBOR scandal gained momentum this week as it was announced that several banks including Citigroup, HSBC, Deutsche Bank and JP Morgan Chase were being sized up by investigators for their role in the rate setting scandal which has already seen Barclay's fined more than $450 million.








Looking at the week ahead, the Euro is expected to continue it's free fall as an extension of Friday's breakout and this will continue to present golden shorting opportunities in the Euro against the British Pound, US Dollar and Japanese Yen - particularly if there is a relief rally as a result of profit taking on all those overloaded shorts from this past week. The economic calendar switches over to the global growth story this week with China, Europe, UK and the US publishing their respective manufacturing and GDP readings. Early on Tuesday sees the release of Chinese HSBC Flash manufacturing PMI, followed by several key PMI readings from the Euro-zone and Germany at the start of the European session. UK GDP data on Wednesday is expected to show further contraction to -0.3% (down from a previous reading of -0.2%) while Friday's US GDP reading is expected to show growth of 1.6% during Q2 (below the previous reading of 2.0%).