Market opening expected today (31/07/2012)

USDINR- Will open down

EURINR- Will open flat or down

GBPINR- Will open flat or down

JPYINR- Will open down

Forex Exchange Morning Report (31/07/2012)

Markets were largely stable overnight. Adopting a wait-and-see posture ahead of the key US and EZ central bank meetings on Wednesday and Thursday, the S&P500 drifted sideways and is currently unchanged from the previous close. Weaker data had no material impact, Eurozone confidence surveys and Dallas regional manufacturing activity lower than expected. Of curiosity interest was the launch of an investigation into whether ECB-chief Draghi's simultaneous membership of the G30 group constitutes a conflict of interest, according to Der Spiegel. Commodities were mixed, the CRB index up 1.0% but oil down 0.4%, copper down 0.2%, and corn up 2.9%. US 10yr treasuries pared the previous day's losses, yields falling from 1.57% to 1.49%. Spain's 10yr yield fell 13bp but Italy's rose 7bp.

The US dollar index (DXY) was steady around 82.80. EUR initially slipped from 1.2298 to 1.2225 but recovered during the London afternoon to 1.2264. USD/JPY slipped from 78.40 to 78.12. AUD rose from 1.0455 to 1.0508 - a three month high - in London. NZD failed to follow suit, only firming to 0.8100 which was below its domestic session peak of 0.8113. AUD/NZD consequently rose from 1.2940 to 1.2990

Economic wrap

US Dallas Fed factory index drops from 6 to -13 in July. That was well below Westpac's bottom of the range -2 forecast (we had the only sub 0 forecast) and reflected respondent concern about the economy rather than their own activity levels, which were lower but still positive for production, orders, shipments and jobs.

Euroland business surveys fall sharply. The business climate index dipped from -0.95 to -1.27 in July, the same level it fell to in October 2008, after the Lehmans collapse six weeks earlier. The economic confidence index which combines consumer and business surveys fell from 89.9 to 87.9 in July, which is midway between the Sep and Oct 2008 readings - clearly these surveys are sensing something calamitous is afoot. These surveys would not reflect the last few days' change of mood of course, since the Draghi et al pledges to do whatever it takes to preserve the euro. Today Draghi was reportedly meeting with the Bundesbank chief (trying to change his anti bond buying stance) and the US Treasury Secretary (for tips on how to deal with political leaders who can't make decisions except when they make the wrong ones).

UK housing/credit/retail data weak across the board. Hometrack reported their first monthly house price decline for the year in July. The fall was just 0.1% but it left the annual pace at -0.5% yr. New mortgage approvals dropped from 51k to 44k in June - the two public holidays for the Jubilee may have been a factor but on the other hand May did not benefit from one less holiday than usual. Mortgage outstandings fell £355mn in June, their first decline in a year, and May's gain was revised down by £300mn. But consumer credit grew by £600mn in June, down on May's £800mn perhaps because of the bad weather which also afflicted April. Meanwhile M4 money supply growth slowed to -5.2% yr, its slowest on record. And back to the consumer, the CBI retail survey for July had reported sales drop from 42 to 11, with the July survey catching a lot of the recent bad weather and June boosted by the Jubilee holidays

Morning report (30/07/2012)

GDP figure from the US on Friday was better than expected, but nevertheless a minor decline from the previous quarter from 2.0% to 1.5%. Trading on Friday indicates that the market is increasingly discounting QE3. The question is whether QE3 will be launched on Wednesday. We do not think so. It appears more obvious to wait until September so that the Fed committee will have another two employment reports to use as a basis for its decision and that the announcement is made at a monetary-policy meeting with subsequent press conference (at the end of August Mr Bernanke is scheduled to speak at Jackson Hole – an event which has served as a stage for the Fed's QE in recent years).

Market sentiment: indications are that the euphoria following comments by Mr Draghi and Mr Nowotny is slowly losing steam. The rise of the EUR/USD and EUR/JPY rates has stopped while US equity futures are in negative territory. There are plenty of economic indicators this week, which makes it difficult to have confidence in technical levels. Currently, the market is in an uptrend (up for equities and risky assets) and the budding signs last week of a breach of the trend were quickly stopped by comments by Mr Nowotny and later Mr Draghi.