Key News

• German Investor Confidence Rises to Highest Level in More Than Three Years (Bloomberg)
• Chinese Shares Rebound (WSJ)

Quotable

“One of the happiest days of my life is when I made five or six hundred pesos from a crop of watermelons I raise all on my own.”

                             Emiliano Zapata

FX Trading - The Euro Isn't Liking Its Day at the ZEW
Ok - quick recap of yesterday ...

A bunch of noise out of UK hits the British pound hard ... ECB Axel Weber warns of "Financial Crisis: Round 2" heading for Europe ... foreign direct investment in China sinks again and Chinese equities plunge and drag down risk appetite ... the US dollar runs higher, building on Friday's momentum ...

Okay - what's happening this morning now that the dollar has got two good days under its belt?

It's a far quieter morning so far with the dollar giving back some of the ground it gained yesterday. As far as market moving news goes, German investor confidence (courtesy the ZEW research center's index) smoked expectations ... adding to recent surveys and reports out of Germany and the Eurozone that have highlighted improving confidence among consumers, businesses and investors.

Clearly this can be taken as a plus for the Germany's economic prospects as these reports normally do. But on a relatively lackluster day so far in the currency world, the euro is acting rather poorly. After a kneejerk rally - spiking to new hourly highs - the euro has faded rather quickly.

With German consumer confidence headlines players might expect a return of risk appetite in the markets today. But US futures have not responded. Speaking for the euro price action, this confidence among investors and analysts doesn't jibe with Mr. Weber's expectations for more financial crisis fallout.

Is this adverse price action relative to the news flashing a big, bright SELL signal?

It would seem so, but with little real data left on the docket today, the risk appetite force that controls all markets will likely be looking to earnings announcements from some key consumer-related outfits. After Lowe's disappointment helped to upend equities yesterday, traders will be keeping a close eye on Home Depot, Target and HP when their second-quarter numbers are released today.
Guest Column by Yves Lamoureux

Certainly you aren't forgetting about last week's less-than-stellar retail sales figures for the month of July. Consumers still aren't spending and will be bound for many, many months to come -- how good could today's earnings numbers really be?

When will a currency choice not first become a stock market assessment? Who knows!