New home sales rose 11% in the month of June, which gives the appearance the housing market is recovering. In the macro picture, consider that the homes have moved into the hands of first time buyers with the assistance of a tax credit, along with the appeal of significant price cuts in the marketplace. The median price of a new home old last month was still 12% lower than the previous year. I anticipate that this light surge off the lows will ease off and remain flat for some time. In light of the strong number in new home sales, equities markets have not responded with emotion, which suggests equities may have run their course making way for a pullback. A move to risk aversion will support the USD against the crosses. Read More...

The following video of a Bloomberg interview with Jim Rogers offers some interesting views on currencies.


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Fed Chairman Bernanke's testimony did not surprise investors as he said that while the Fed has the ability to tighten monetary policy from the current state, it is in no rush to do so. 10y Treasury yields dropped below 3.50% and the 2s10s curve flattened down to 257bp on the back of his comments that inflation pressures are limited.

2y yields dropped as well as Bernanke said the Fed would keep rates low for quite some time. Earlier in June, 2y yields had jumped as investors thought the Fed might tighten earlier than expected on the back of the better non-farm payrolls data. For a study on the impact of interest rate spreads in fx, review the course titled "Inside the Banks" at www.protradersclub.com But even as Bernanke sounded cautiously optimistic on parts of the economic outlook, he also cautioned on the labour market, which helped temper expectations on the timing of Fed rate hikes. Read More...

Tags: FED

Earnings season outperformers outweigh underperformers by 3:1. I am virtually unclear on how this happens. How does a major financial institution's clients loose considerable book value, while earnings are up. Does this mean that the bank made money while most its clients lost? The questions must be raised, but the market won't raise them. Where has the profit come from. Probably not from investing, or loans, rather out of client accounts in some manner. They continue to report in excess, because the market actually believes them and will price the assets according to their perceptions. The market WANT's to see a rally so are willing to believe and hope for good news, or not bad news. As traders, we have to work around how we see others perceptions of the market and manage our decisions and positions accordingly.

Ratings agency Fitch cut the outlook for New Zealand's long-term sovereign credit rating from stable to negative.

China reported more consensus-surprising news overnight as Q2 GDP figures showed growth rebounded to 7.9% (UBSe. 7.0%), increasing hopes that the world's largest emerging economy would be able to stimulate a global rebound. Record investment growth fuelled by generous credit was the major contributing factor, which raises questions over the sustainability of current growth patterns.
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There is very little non-US data this week, but earnings season is heating up and financial services companies will also begin reporting Q2 results. The consensus is far from clear on corporate performance and companies' medium-term outlooks and their views on the macro environment will be as important as the results themselves. More important is how the market reacts to the manipulative verbiage that comes off the big oak desks of our nations leading corporations. Phrases like, "not as bad as expected," in attempts to support their dismal state of affairs can cause errant volatility in holiday season thin markets.

Commenting on the takeup of the recent massive ECB liquidity operations, and the large quantity of cash that is deposited at the ECB each night instead of being loaned to the real economy, ECB President Trichet said that it may take time for the extra liquidity to be transformed into credit. In such case, the banks need to feel secure enough to lend, which is independent of ECB initiatives, although their intentions are appreciated. Read More...