After seven years without a hit, Elvis Presley reclaimed his title of “The King” following the release of Suspicious Minds. The original version of the song was a flop, written and sang by Mark James, a Memphis singer. However, Elvis, heard the song, fell in love with it and turned it into a hit.

Markets have shifted from a wait and see stand to a slightly more suspicious mode ahead of the Fed and BoJ meeting this week. US equities retreated from new record highs pulled down by energy shares as oil prices fell. Oil prices have remained under pressure on concerns of oversupply and lack of the demand and a Barclays report overnight showed that demand for the third quarter of 2016 has grown at less than one-third the rate it did in the same period of last year. Meanwhile European indices managed to end the day in the positive territory, helped along by a better than expected German IFO report. The business climate index fell less than expected in July (from 108.7 to 108.3 vs 107.5 forecast) suggesting the German economy has not yet been materially affected by the UK decision to leave the EU.

In contrast, the UK CBI business optimism index fell to a dire -47 versus -15 forecast and -5 previously. This was the latest in a series of surveys to suggest the Brexit vote is dampening business confidence in the UK. The FTSE100 index closed 0.3% and GBPUSD was little changed at 1.3134.

Looking at other currencies, most g10 currencies have traded within fairly contained ranges. The Yen has edged a little bit higher against the USD, climbing 0.31% over the past 24hrs and probably reflecting a little bit of uncertainty on the magnitude of the expected fiscal and monetary stimulus due to be announced on Friday. The CAD and NOK are the two major underperformers down 0.66% and 0.33% respectively weighed down by the fall in oil prices (WTI and Brent oil are both down by around 2%).The USD/CAD has now broken above the upper band of its 1.246 to 1.318 range held since early April and at 1.3211, the next resistant level is seen at its 100 day moving average of 1.3315.

Yesterday’s steady rise in the AUD was partly reversed overnight as risk sentiment soured a little and oil prices declined. Overnight the AUD/USD traded down to 0.7455, but in has since recovered some ground and is currently trading at 0.7470.

Relatively Sydney closing levels, 10y USTs are basically unchanged at 1.57% while in Europe 10y Bunds closed 1.2bps lower at -0.04%.

Coming Up

New Zealand’s June trade balance kick off today’s data releases and our BNZ economists believe exports are due for some payback following two months of outperformance. Relative to a year ago, exports are seen to decline by 8% while imports are expected to fall by 5% resulting in a June deficit of $297m (vs +$150 by consensus)

Australia’s weekly consumer confidence reading is due for release at 10:30am this morning (AEST) and then this afternoon we get New Zealand’s new residential lending figures for June.

The UK releases BBA Loans data for June and the numbers should provide a good indicator of home loan activity over the coming months. The market will be watching to what degree mortgage approvals were affected in the month of the UK EU referendum.

The US has a fair bit of second tier data releases on the roster today. S&P/Case-Shiller 20 City Home Price Index is the first cab off the rank followed by preliminary services and composite PMI readings for July. Then we get consumer confidence (Jul), Richmond Manufacturing Index (Jul) and   new home sales (June).

For choice, we think the US consumer confidence reading should get a look. In June the reading rose to an 8 month high and it will be interesting to see what impact if any Brexit has had on the index, particularly given the decline seen the U of Michigan reading in July.

Overnight

On global stock markets, the S&P 500 was -0.30%. Bond markets saw US 10-years +0.68bp to 1.57%. In commodities, Brent crude oil -2.25% to $44.71, gold-0.5% to $1,315, iron ore +1.8% to $56.86. AUD is at 0.7469 and the range since yesterday 5pm Sydney time is 0.7457 to 0.7492.

Good luck.

For full analysis, download report:

•  Markets Today: 26 July 2016 (PDF 164kb)

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