German economy moving ahead
There was evidence of a steady improvement in Germany with the June CES Ifo business climate survey moving ahead. The index rose to 105.9, up from 105.7 in May. This is the second monthly rise and the improvement seems to be largely driven by the business expectations component which points to stronger growth in the second half of the year.
In the US two Federal Reserve presidents made statements attempting to calm the markets after Bernanke’s announcement the other day that he’s going to start scaling back QE. Richard Fisher, president of the Federal Reserve of Dallas, stated “what we are talking about here is dialling back” and went on to add “the word exit is not appropriate here”. Meanwhile, Minneapolis Fed President, Narayana Kocherlakota, emphasised that Fed policy will remain accommodative “for a considerable time”.
Across the markets sentiment remains preoccupied by Fed policy and concerns of a hard landing in China. In Asia, equity markets took another hit as the Shanghai Composite share index was down nearly 4% and the Nikkei index lost 167 points. Little to note in regards to Sterling except the Governor Mervyn Kings farewell speech, so all eye’s on that.
A contraction in risk appetite saw EUR/USD consolidate around the $1.3130 level while Sterling was relatively well supported with GBP/USD breaking above $1.54 mark and the EUR/GBP now around 1.1750.