Yesterday’s US initial jobless claims report was an eye opener. A massive positive surprise with substantially fewer claims than the preceding period. Economists had forecast 300,000 jobless claims, but the actual number was just 265,000, which is as low as it’s been for 15 years! There are suspicions that there is some seasonality to this low number, but never-the-less this is another stunning demonstration of the robust growth in the US economy, and it is also a good example of why the Federal Reserve may well be correct if they raise interest rates later on in the summer.
On the other side of the pond, the Danish central bank has cut interest rates for the third time in 10 days! The rumours of the EUR-DKK peg being under threat are clearly true, and the central bank is reacting aggressively with the deposit rate being cut a further 15 basis points to -0.5%. Nationalbanken has also been selling Danish Krone to relieve the pressure and sustain the peg at 7.46 to the euro. I agree with the economists who are concerned that the central bank is acting a little scared and desperate. You never got this sort of frantic reaction from the SNB, they just quietly and confidently stated that they would sell whatever amount of Swiss francs were necessary to maintain the peg. Clearly they feel exposed, all I can say is their first few days being in focus has been seriously unimpressive.
Inflation keeps falling here there and everywhere with German numbers slipping into negative territory even as the numbers also fell in Japan (albeit still positive), blame it on oil, we all knew this would happen. Same thing in Spain with deflation deepening, but here’s more positive news… Spanish growth numbers were better than expected, +0.7% versus +0.5% forecast, annual GDP is now the highest it’s been since 2008 at 2%.
Today the new Greek government will meet Eurozone officials in what is likely to be the first of many face to face meetings seeking to resolve the looming crisis. It may not feel like it yet, but we’re probably as close to a break-up of the euro as we have been since the weeks preceding Mr Draghi’s “whatever it takes” speech. As it was thousands of years ago, Greece is once again the centre of civilisation, or at least it has our collective attention!
I spy with my little eye, a complete 5 wave move down for EUR/USD from the highs early last week. If this is correct the likely corrective sequence could take us up to the 1.1560 – 70 area before the next impulsive move lower. At least that’s what I think when I put my Elliott Wave hat on. This makes a good deal of sense to me, and it implies that we don’t see the bearish euro trend reassert itself until early next week probably. Perhaps Nationalbanken is supplying the bid for euros right now!
Some consumer spending and sentiment data coming out later in the US, as well as GDP data and Chicago PMI. We will tweet if anything really stands out. Expectations are for 3% growth versus 5% last time. Very respectable..
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