Narrow Ranges Prevail; Waiting for Godot

The US dollar is trading in narrow ranges against the major foreign currencies in quiet turnover.  Today's settlement the last for the month, but outside of some related flows, activity is uneventful ahead of the EU summit.  Expectations were marked down at the start of the week and Merkel's colorful comments drove the point home.  

There is little to excite the market and shake it out of its slumber today.  Headline risk for ahead of the summit seems modest at best.  The US reports May durable goods orders.  There is some risk of an upside surprise to the consensus expectation for a 0.5% increase that stems from the new orders component of the ISM surveys. 

As an aside, defense spending in the US has been falling for the last couple of quarters and this has contributed to the government's drag on GDP.  Although defense orders in the durable goods order report is often stripped away by economists analyzing the data, it may offer more important insight than usual into the US economy.  

Sterling's resilience is impressive.  It is the second best performing currency against the dollar the past five sessions, behind the yen.  It is off about 0.5%.  Today's data stream was mixed.  On one hand, mortgage approvals fell to its weakest level since April 2011.  Net mortgage lending fell to GBP73 mln, which is a record low, in May.  In April, it stood at GBP516 mln.  This collapse illustrates why the BOE and Treasury recently took measure to boost credit availability and bank lending.  

On the other hand, the June CBI distributive trades report was much stronger than expected at 42, which is exactly twice the May reading.  The market consensus had looked for a decline.  The forward looking expectations component also increased (to 32 from 25).  

The poor news did not weigh on sterling and the good news did not help.  Sterling has been confined to around a 15 tick range on either side of $1.5625. 

There was some rare good news from the periphery today.  Spanish retails sales improved in May to show a 4.9% decline from year ago levels compared with a 10% decline in April. A Greek news paper reported that about 2 bln euros in deposits returned to Greece since the June 17 election.  Separately, Expedia reported a 27% jump in tourist bookings in the week following the election. Of course, these are minor positives in a sea of negatives and are far from what is need to stem the rot.