Dollar, Major Currencies Look to US Economic Calendar for Direction

Talking Points

• Quiet European Economic Calendar Puts Focus on US Richmond Fed Gauge
• Traders Watching Bond Yield Levels as Italy and Spain Hold Debt Auctions
• US Dollar Corrects Lower in Asian Trade, Commodity Bloc Outperforming

The US Dollar corrected lower in overnight trade after advancing against most of its top counterparts as risk aversion stocked haven demand for the benchmark currency in the preceding 24 hours. The sentiment-linked Canadian, Australian and New Zealand Dollars outperformed. Although Asian stock exchanges sold off, the move appeared to be a catching-up to weakness seen in yesterday's European and US sessions by regional investors that was already reflected in exchange rates.

A relatively quiet European economic calendar shifts the focus to US docket, where the Richmond Fed Manufacturing gauge takes top billing. The release is one of a series of surveys due this week that traders will use for a timely measure of where the world's top economy stands in June. The final balance of outcomes is likely to be particularly significant given hopes that a recovery in North America can help offset malaise in Europe and Asia.

An analogous release from the Dallas Fed surprised higher yesterday. A similar result this time around may boost risk appetite but likewise reinforce the case against additional Fed stimulus. This may weigh on the US Dollar against its higher-yielding counterparts but drive the benchmark currency against the Japanese Yen, where prices remain sensitive to US Treasury yields. June's Consumer Confidence reading is also on tap.

S&P 500 stock index futures are pointing higher in late Asian trade, suggesting risk appetite is relatively well-supported heading into the European trading day. Italy and Spain are due to hold bond auctions. Rome will sell 2014 zero-coupon paper as well as 2016 and 2026 inflation-linked bonds. Madrid will auction off 84- and 168-day bills. As usual, traders will look to average yields and bid-to-cover readings for signs of sovereign stress in the region.

Asia Session: What Happened

GMT	CCY	EVENT	ACT	EXP	PREV
23:50	JPY	Corporate Service Price (YoY) (MAY)	0.1%	0.3%	0.2%
2:00	CNY	Conference Board Leading Index (MAY)	235.1	-	232.5
5:07	JPY	Small Business Confidence (JUN)	46.2	-	47.2

Euro Session: What to Expect

GMT	CCY	EVENT	EXP	PREV	IMPACT
6:00	EUR	German GfK Consumer Confidence Survey (JUL)	5.6	5.7	Medium
6:00	CHF	UBS Consumption Indicator (MAY)	-	1.41	Medium
6:45	EUR	French Consumer Confidence Indicator (JUN)	89	90	Low
8:00	EUR	Italian Retail Sales (YoY) (APR)	-0.1%	1.7%	Low
8:00	EUR	Italian Retail Sales s.a. (MoM) (APR)	-0.6%	-0.2%	Low
8:30	GBP	Public Finances (PSNCR) (£) (MAY)	4.0B	-23.2B	Medium
8:30	GBP	PSNB ex Interventions (MAY)	14.8B	-16.5B	Medium
8:30	GBP	Public Sector Net Borrowing (£) (MAY)	14.0B	-18.8B	Medium
8:30	EUR	Spain to Sell 84-168 Day Bills	-	-	Medium
9:00	EUR	Italy to Sell 2014 0-Coupon and 2016-26 I/L Bonds	-	-	Medium
9:00	EUR	Italian Hourly Wages (YoY) (MAY)	-	1.4%	Low
9:00	EUR	Italian Hourly Wages (MoM) MAY)	-	0.3%	Low

Critical Levels

CCY	SUPPORT	RESISTANCE
EURUSD	1.2458	1.2562
GBPUSD	1.5544	1.5600

--- Written by Ilya Spivak, Currency Strategist for Dailyfx.com

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