Market directives failed to provide any unified course across the risk spectrum overnight as participants wait in anticipation for critical feedback from the ECB and Federal Reserve later this week. After kicking off the week on a low note, the Euro resumed a north-bound course erasing earlier losses in the session which saw the EURAUD pair hit another euro-era low of A$1.1644. European stocks pared Monday's gains with benchmark indices finishing the day in the red, and peripheral debt yields began to move higher in anticipation of the European Central Bank meeting on Thursday.
Meanwhile, Germany has reiterated their resistance to providing Europe's permanent bailout fund, the ESM, with a banking license. An official from Merkel's ruling coalition party stated "It's clear that the ESM shouldn't become the ECB's bad bank." This represents a clear set-back for markets which recently rallied on the prospect of granting Europe's rescue fund a banking license after Austrian central bank President and ECB official Ewald Nowotny, said there are arguments in favor of granting Europe's rescue fund a banking license. If granted, this would allow the European Stability Mechanism to access ECB funding, in-turn boosting its €500 billion firepower.
Economic news showed persistent Eurocentric negativity appears to be taking its toll on German retailers with sales falling 0.1 percent in June, representing the third consecutive month of losses. Economists had forecast sales would rise 0.5 percent. Meanwhile, 7,000 more German citizens were unemployed in July according to the latest statistics from the Federal Labor Agency, with the official jobless rate holding steady at 6.8 percent - in line with economists' forecasts. The unemployment rate encompassing the 17 nations that the use the Euro currency rose to a revised 11.2 in May and remained unchanged in June - the highest level of unemployment since the data series begun in 1995. Meanwhile, Euro area inflation remained at 2.4 percent in July - in line with estimates and unchanged from May.
Across the Atlantic, U.S stocks remained in a holding pattern ahead of this week's ECB and FOMC policy meetings with on-target economic data failing to inspire any major gains. U.S personal consumption expenditure matched estimates to record 1.8 percent growth in June, and U.S consumer confidence unexpectedly rose to an index level of 65.9 in July from 62.7 in June.
Support for the Australian dollar was maintained throughout the session with price action adhering to a tight 30-35 pip range, despite moderate losses from key sentiment barometers. Technical's suggest tentative support just above 105-figure (which is currently being tested) while resistance continues to be displayed just below the 105.4 US cent levels. The day ahead will see the focus turn to Chinese Manufacturing data due for release at 11am AEST, with the HSBC equivalent on the docket at 1230pm. Less influential local data includes the house price index at 11.30am.
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