Morning Forex Fundamental

EUR

'The hurdles are still high, but European leaders do seem to be working towards more positive results' - Callum Henderson, global head of currency research at Standard Chartered Plc

Moody's: Economic adjustments are only half complete

Impact high

Greece, Spain and Italy are only halfway through implementing reforms and adjusting the economic imbalances, said the Moody's Investors Service on Tuesday.

'Adjustments, both in the periphery and the core, have already taken place -- in some cases, to a significant degree,' Moody's analysts including by Sovereign Chief Economist Lucio Vinhas de Souza in New York said in a report published today. The process 'is at best only half complete.'

Euro gained before Luxembourg Prime Minister Jean-Claude Juncker visit to Greece tomorrow. Euro currency index added 0.06 per cent to 90.97 points.

'The hurdles are still high, but European leaders do seem to be working towards more positive results,' said Callum Henderson, global head of currency research at Standard Chartered Plc in Singapore

USD

'The markets may be a little bit tired--obviously we closed at near four-year highs for the S&P and the Dow Friday' - Ryan Larson, head of equity trading at RBC Global Asset Management

U.S. stocks were little changed on Monday

Impact High

U.S. stocks were little changed on Monday ahead of Luxembourg Prime Minister Jean-Claude Juncker visit to Greece tomorrow.

The Standard & Poor's 500 declined to 1,418.13. The Dow Jones Industrial Average slid 0.03%, or 3.56 points, to 13,271.64. The Nasdaq Composite edged lower 0.01%, or 0.38 points, to 3,076.21.

'The markets may be a little bit tired--obviously we closed at near four-year highs for the S&P and the Dow Friday,' said Ryan Larson, head of equity trading at RBC Global Asset Management.

'Markets run, and they take a few breathers.'

GBP

'I don't think there is any significant news flow to create many banana skins in the next week or two' - Andy Ashe, head of sales at Monument Securities

U.K. stocks closed lower on Monday

Impact High

U.K. stocks fell on Monday weighted by a decline in banks. The FTSE 100 Index edged lower 0.5 per cent, or 28.05 points to 5,824.37.

'All it took to reverse this morning's positive start ... was for the Bundesbank to puncture this weekend's recycled story about the ECB capping peripheral bond yields,' said Michael Hewson, Senior Market Analyst at CMC Markets UK.

On Thursday, the Confederation of British Industry will release its realized sales index and the British Bankers' Association will announce number of new mortgages approved

CHF

'Europe's commitment on lending to banks shows that the region won't let them fail' - Pierre Mouton, a fund manager at Notz Stucki & Cie

Swiss stocks fell on Monday

Impact: Medium

Swiss stocks retreated on Monday, paring two week gains after the European Central Bank rejected a possibility of setting yield limits on each country's debt.

The Swiss blue-chip index SMI, a measure of the largest and most actively traded companies fell 0.35% to 6,506.25. The broader Swiss Performance Index erased 0.31%.

Swiss Federal Statistical Office is to announce trade balance data on Thursday. The nation recorded trade surplus of 2.25 billion Swiss francs in June, after posting a surplus of 2.48 billion Swiss francs in May.

JPY

'Concerns about the economic slowdown in the U.S. are easing' - Koichi Kurose, chief economist in Tokyo at Resona Bank Ltd.

Japanese stocks closed mixed on Tuesday

Impact: Medium

Japanese stocks closed mixed on Tuesday ahead of U.S. housing and durable goods data.

The Nikkei 225 Stock Average fell 0.16 per cent, or 14.24 points, to 9,156.92. The broader Topix Index gained 0.08 per cent, or 0.60, to 765.26.

'Concerns about the economic slowdown in the U.S. are easing,' said Koichi Kurose, chief economist in Tokyo at Resona Bank Ltd.

'The markets are moving like a seesaw, swayed by whatever European officials say. With no catalysts to be found in the markets, investors are looking for anything. Short-term individual investors may look to Apple' and buy related shares.

Press Review

Europe

The European Central Bank said they may 'undertake outright market operations', as soon as European governments will activate the region's rescue funds to buy government bonds. The ECB kept its key lending rate at 0.75%.

Spanish and Italian bonds jumped, pushing Spain's benchmark 10-year yield down to 6.82%, and Italy's 10-year debt yields to 6.06%.

Markets to European Central Bank: Get Germany on Board

http://www.cnbc.com/id/48732967

As the European Central Bank (ECB) mulls steps to end the euro zone debt crisis, analysts say what's really key is that Germany fully supports the measures – otherwise the ECB's credibility is likely to take a hit, sending markets back into a tailspin.

Germany puts pressure on Greece PM over bailout targets

http://www.bbc.co.uk/news/business-19316221

Greece must stick to its agreed bailout conditions, Germany says, at the start of a week in which Greece is expected to ask for more time to make cuts

USA

The U.S. July jobs data came in better-than-expected; nonfarm payrolls rose to 163,000 in July, from 64,000 in June. In the meantime, the unemployment rate rose to 8.3 per cent in July, from the previous 8.2 per cent in June. Additionally, treasury yields hit record lows of 1.379% on 10-year notes and 0.535% on 5-year notes.

The U.S. budget gap tumbled to $69.6 billion in July, from $129.4 billion in the same month the previous year.

Apple Now Biggest-Ever U.S. Company

http://online.wsj.com/article/SB10000872396390443855804577601773524745182.html?mod=WSJUK_hpp_LEFTTopWhatNews

Apple Inc. surpassed Microsoft Corp. monday as the largest U.S. company ever, measured by stock-market value.

Trucking Stocks Offer Bet On U.S. Consumers For Holidays

http://www.bloomberg.com/news/2012-08-21/trucking-stocks-offer-bet-on-u-s-consumers-for-holidays.html

Holiday sales probably will grow at a slower rate this year than last. That may present an opportunity for investors prepared to wager they'll be better.

Asia & Pacific

Economy decelerated in the second quarter, with GDP adding 0.3% in the April-June period. Consumer spending slowed almost to a minimum and exports grew modestly, increasing a possibility of economic stimulus.

China is suffering a major economic slowdown. Trade balance narrowed to $25.1 billion in July, with year-over-year exports and imports adding only 1% and 4.7% in July respectively. The World Bank has recently cut growth forecast for the nation to 7.9% in 2012.

Asian Stocks Advance As China Moves To Ease Cash Crunch

http://www.bloomberg.com/news/2012-08-21/asian-stocks-gain-before-u-s-housing-durable-goods-data.html

Asian stocks rose, with the regional benchmark index heading for a three-month high, as China moved to alleviate a cash crunch and ahead of U.S. reports that are expected to show the world's biggest economy is improving.

China Swaps Drop From 3-Month High as PBOC Adds Record Cash

http://www.businessweek.com/news/2012-08-20/china-swaps-drop-from-three-month-high-as-pboc-adds-record-cash#r=bloomberg

China's interest-rate swaps fell from a three-month high as the central bank injected record funds into the financial system to ease a cash crunch.