FOREX IN REVIEW

Economies across Europe experienced GDP declines according to yesterday's figures led by the -3.30% contraction year over year in Portugal. Germany, Austria, and France were narrowly able to avoid contractions however growth in the Eurozone is flagging following a -0.20% contraction. Meanwhile, a proposed banking union within the Eurozone that extends the ECB's powers of banking oversight is gaining traction with implementation expected as soon as 2013. European equities closed higher yesterday, led by the German DAX which climbed 0.94% followed by a 0.85% gain in the Italian MIB. The Spanish IBEX was also stronger, adding 0.78% as yields on longer-dated debt continued to fall. EURUSD is up marginally, ticking to 1.2323 after reversing yesterday's gains.

Asian equities are mostly weaker following negative earnings announcements as concerns about equities in China have led retail investors to pull funds from the stock market at a record pace. Chinese officials are also concerned that reserve ratio cuts may stoke inflation, thus hampering efforts to further contain housing prices and stimulate growth. USDJPY saw major gains yesterday as positive U.S. data and comments from the Bank of Japan have propelled the pair to 78.800. The BoJ intends to maintain its 1% inflation target and has permission to engage in easing until that goal is reached. Asian indices are led lower by the -1.03% slide in the Hang Seng followed by a -0.48% fall in the Australian ASX. The Nikkei is outperforming peers, declining only -0.17%.

Investors while cautious, are viewing the U.S. economy with more optimism following yesterday's retail sales figures and ahead of manufacturing data due later today. Even though growth is regarded as somewhat "sluggish" it has nevertheless reassured traders of expansion. Equity indices closed mixed with the Dow Jones rising marginally, adding 0.02% while the S&P 500 lost -0.01% and the Nasdaq dropped -0.18%. The dollar is trading near a 1-month high with DXY ticking to 82.540. Even though gold has retreated as expectations for further quantitative easing diminish, recent filings show that prominent fund managers John Paulson and George Soros have added to their substantial gold positions. Gold has gained 0.12% in the overnight session, rising to $1604.30. Gold fell nearly 4% in the second quarter, adding to its allure amongst the managers.
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