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US Consumer Sentiment index falls by 10 points.

Friday's University of Michigan Consumer Sentiment index is the first data point that suggests the US could be heading for a real double-dip rather than just a moderation in the pace of growth. The index fell 10 points to 66 in July, reversing almost all of the past year's gains. At this level the index is consistent with an outright contraction in consumer spending. One swallow doesn't make a summer and so the market awaits fresh evidence.

Attention in the US this week will be focussed on Fed Chairman Bernanke's testimony to Congress on Wednesday. He's expected to sound cautious about the economy but not to signal further monetary easing. We expect to see much the same from our own Reserve Bank Governor i.e. no cut at Thursday's MPC meeting but voicing enough concerns to keep the betting going for a September cut. The big event of the week will come late Friday with the release of the EU stress tests. Similar tests in the US last May proved to be the turning point of the crisis but the market is unsure whether the EU tests will be credible or not.

Overall, this week could prove especially volatile. The ZAR starts off on the back foot, with USD/ZAR set to trade back at 7.60 and EUR/ZAR close to 9.80. Event risk is mostly concentrated at end-week but everyday will see further US corporate results trickling in, leaving us tracking Wall Street. For the moment, USD/ZAR is stuck at 7.52 - 7.65 but it's quite easy to see 20 cents swings either way before Friday's close.

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