Risk aversion dominates markets as traders were disappointed by the Fed minutes which did not show an inclination by the FOMC to provide stimulus without a worsening condition in the economy…

Overnight Developments:

• FOMC Minutes show that Fed is generally unwilling to add more stimulus unless economy gets worse.
• BOJ refrains from adding any stimulus.
• In Australia, bad news as economy sheds 27K jobs, a large undershoot of the flat reading expected, and unemployment rate rose to 5.2% from 5.1%.
• ECB says that the amount of money held at deposit with it fell by half following drop of deposit rate to 0%.

Concerns Remain:

• We’ve covered the poor macro data coming from US, Europe, China, etc. and the expectation that global growth will be poor in the 2nd half of the year.
• Euro-zone crisis seems to have walked back slightly from the ledge, but still remains unsolved.
• Most importantly to the shorter term, companies are revising down their outlook in earnings, which may create bearish environment in US equities.
• And, the last leg of support – central bank action – does not seem like its enough for the market.

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  Reaction - Investors Seek Safety:<

• As a result we see safe-haven assets rising like US, UK, and German bonds are rallying, equities are falling, and USD and JPY are gaining against commodity and growth linked currencies.
• We again are in a mode where we will be looking for bad news (especially from US) to get more expectation of Fed action back on the table. Today we have jobless claims data.
• Later tonight, slew of reports from China including 2nd quarter GDP. This can have an important impact on sentiment for overnight session.

Nick Nasad is a macro economist, market analyst, and educator; and one of the main contributors to FXTimes.com – provider of ws, Analysis, Education, Videos, Charts, and other trading resources.

Information and opinions contained in this report are for educational purposes only and do not constitute an investment advice. While the information contained herein was obtained from sources believed to be reliable, author does not guarantee its accuracy or completeness. FXTimes will not accept liability for any loss of profit or damage which may arise directly, indirectly or consequently from use of or reliance on the trading set-ups or any accompanying chart analysis.