Market opening expected today (19/07/2012)

USDINR- will open flat

EURINR- will open up

GBPINR- will open up

JPYINR- will open up

Forex Exchange Morning Report (19/07/2012)

Sentiment improved modestly. During a day when there was little data of note, lingering expectations the Fed would eventually do more to stimulate the economy helped push the S&P500 to a fresh 2 ½ month high (up 0.5% on the day so far). Goldman Sachs, for example, yesterday forecast QE3 would occur after the November elections in the US. The Beige Book of regional US economic conditions had no market impact, reporting modest-to-moderate growth (less downbeat than Bernanke's assessment the previous day).The IMF's latest report on the Eurozone urged the ECB to cut rates further and consider QE. Commodities are firmer, the CRB index +1.2%, oil +1.1%, copper +0.6%, but gold -0.5%. US 10yr treasury yields remained defensive, slipping from 1.50% to 1.47% and back to 1.49% near the close. Among Eurozone yields, Spain underperformed (10yr yield up 14bp).

The US dollar index (DXY) saw little net change overnight. EUR fell from 1.2290 to 1.2217 in London and rebounded to 1.2278 in NY. USD/JPY slipped from 79.10 to 78.77, markets continuing to focus on the narrowing interest rate spread. AUD tracked sideways until early NY when it surged with US equities from 1.0292 to 1.0365. NZD drifted lower until that surge helped it from 0.7925 to 0.8006. AUD/NZD continued to extend higher, reaching 1.2990 before settling back at 1.2950

Economic wrap

US housing starts rise 6.9% in Jun but permits fall 3.7%. Multiples added to starts by rising 12.8% and detracted from permits by falling 10.9%. Single family starts rose for the fourth month running by 4.7% and single family permits rose 0.6%, their third rise in a row. More evidence here that the housing market may have bottomed out albeit at a very low level of activity.

Fed chair Bernanke repeated his policy testimony in the House today. Treasury Secretary Geithner acknowledged the economy is “definitely slower” but denied it was heading back into recession.

Bank of England MPC voted 7:2 in favour of this month's £50bn asset purchase plan extension. The two dissenters thought the special measures announced at the Mansion House (cheap funding for banks to lend to households and businesses) would be sufficient for the time being. The minutes also showed some discussion about whether these measures might make a further bank rate cut (from 0.5% currently) feasible.

UK employment rose 181k in three months to May after a 53k rise in Dec-Feb. This jobs growth occurred when GDP was contracting. Mar and May weather was unseasonally warm (though April was horrible). That may explain some of this jobs strength. And there are other distortions this year such as changed public holiday arrangements and the Olympics but it is not clear how much they would be impacting these data already. Effectively the question is - what is the better guide to the economy: weak GDP and business surveys OR solid jobs growth? The report also showed the jobless rate edging down from 8.2% to 8.1% in May (the peak was 8.4% in Jan). Benefit claimant count unemployment rose 6k in June after a 7k May gain