The dollar extended its rally versus the euro and sterling on concern over European banks¡¯ exposure to US subprime problems. The euro fell off the 1.36 handle versus the dollar and reached as low as 1.3537. The sterling slumped against the dollar and broke through 2 for the first time in six weeks.
The sterling weakened sharply as two UK government reports showed an expected decline in inflation, dampening expectations for another rate hike by the year-end. UK consumer prices index fell from 2.4% to an annual rate of 1.9% in July, below the Bank of England¡¯s target rate of 2% for the first time since March 2006 and worse than the estimate of 2.3%. Another inflation gauge, retail price index, fell to 3.8% in July, also below the forecast of 4.3% and a reading of 4.4% in the previous month.
The euro was hit by soft GDP reports from euro zone and Germany. Euro zone economic growth slowed from an annual rate of 3.1% to 2.5% in the second quarter, below the forecast of 2.7%. Germany GDP also fell to 2.5% in the second quarter, down from a 3.3% growth rate in the prior quarter.
Thursday
Risk Aversion Lingers in FX
At 4:30 AM UK August MPC Meeting Minutes (exp 9-0, prev 3-6)
UK June Claimant Count (exp –10.0k, prev –13.8k)
UK June Unemployment Rate (exp 5.4%, prev 5.4%)
At 8:30 AM Canada June Manufacturing Shipments (exp –0.2%, prev –0.1%)
August NY Fed Manufacturing Survey (exp 18.5, prev 26.46)
US July core CPI m/m (exp 0.2%, prev 0.2%)
US July core CPI y/y (exp 2.2%, prev 2.2%)
US July CPI y/y (exp 2.4%, prev 2.7%)
At 9:00 AM US June TICS (exp $65.0 bln, prev $126.1 bln)
At 9:15 AM US July Industrial Production (exp 0.3%, prev 0.5%)
US July Capacity Utilization (exp 81.8%, prev 81.7%)
At 1:00 PM US August NAHB (exp 23.0, prev 24.0)
The dollar continues to firm against the euro and sterling, but drifts further versus the yen. A barrage of US economic data is slated for release in the coming session, including key gauges of inflation and manufacturing. The July core CPI figures are seen unchanged from their prior readings at 0.2% m/m and 2.2% y/y. The annualized headline figure however, is estimated to fall to 2.4% for July, down from 2.7% in the previous year.
UK June Claimant Count (exp –10.0k, prev –13.8k)
UK June Unemployment Rate (exp 5.4%, prev 5.4%)
At 8:30 AM Canada June Manufacturing Shipments (exp –0.2%, prev –0.1%)
August NY Fed Manufacturing Survey (exp 18.5, prev 26.46)
US July core CPI m/m (exp 0.2%, prev 0.2%)
US July core CPI y/y (exp 2.2%, prev 2.2%)
US July CPI y/y (exp 2.4%, prev 2.7%)
At 9:00 AM US June TICS (exp $65.0 bln, prev $126.1 bln)
At 9:15 AM US July Industrial Production (exp 0.3%, prev 0.5%)
US July Capacity Utilization (exp 81.8%, prev 81.7%)
At 1:00 PM US August NAHB (exp 23.0, prev 24.0)
The dollar continues to firm against the euro and sterling, but drifts further versus the yen. A barrage of US economic data is slated for release in the coming session, including key gauges of inflation and manufacturing. The July core CPI figures are seen unchanged from their prior readings at 0.2% m/m and 2.2% y/y. The annualized headline figure however, is estimated to fall to 2.4% for July, down from 2.7% in the previous year.
Greenback Rose on Heightened Risk Aversion
The unwinding of carry trades continues to dominate the foreign exchange market. The greenback strengthened as investment capitals flow back to safe haven amid the heightened risk aversion. The euro fell another 100 pips today to as low as 1.3450 versus the dollar.
The market shrugged off economic data as all the eyes were on risk aversion. US CPI rose 0.1% in July, leading to a year-on-year rate down from 2.7% to 2.4% as expected. Excluding food and energy, core CPI rose 0.2% as expected. New York Fed manufacturing survey fell slightly from 26.46 to 25.06 in August, above the estimate of 18.5. US Treasury reported net foreign purchases of long-term securities for June were 120.9 billion, double the forecast of 65 billion. US industrial production increased 0.6% in July, beating the estimate of 0.3% and a reading of 0.5% in the earlier month. US capacity utilization was barely changed at 81.9% in July. The National Association of Home Builders/Wells Fargo sentiment index declined from 24 to 22 in August, the lowest since September 2001.
EURUSD will face interim resistance at 1.3480, followed by 1.35 and 1.3530. Additional ceilings will emerge at 1.3550, backed by 1.3570. Support starts at 1.3450, backed by 1.34, 1.3380 and 1.3350. Subsequent floors are eyed at 1.33.
The market shrugged off economic data as all the eyes were on risk aversion. US CPI rose 0.1% in July, leading to a year-on-year rate down from 2.7% to 2.4% as expected. Excluding food and energy, core CPI rose 0.2% as expected. New York Fed manufacturing survey fell slightly from 26.46 to 25.06 in August, above the estimate of 18.5. US Treasury reported net foreign purchases of long-term securities for June were 120.9 billion, double the forecast of 65 billion. US industrial production increased 0.6% in July, beating the estimate of 0.3% and a reading of 0.5% in the earlier month. US capacity utilization was barely changed at 81.9% in July. The National Association of Home Builders/Wells Fargo sentiment index declined from 24 to 22 in August, the lowest since September 2001.
EURUSD will face interim resistance at 1.3480, followed by 1.35 and 1.3530. Additional ceilings will emerge at 1.3550, backed by 1.3570. Support starts at 1.3450, backed by 1.34, 1.3380 and 1.3350. Subsequent floors are eyed at 1.33.
Volatility Props USD, JPY
At 2:00 AM Germany July HICP m/m (exp 0.5%, prev 0.1%)
Germany July HICP y/y (exp 2.0%, prev 2.0%)
Germany July CPI m/m (exp 0.4%, prev 0.1%)
Germany July CPI y/y (exp 1.9%, prev 1.8%)
At 4:30 AM UK July Retail Sales m/m (exp 0.2%, prev 0.2%)
UK July Retail Sales y/y (exp 3.4%, prev 3.4%)
At 5:00 AM Eurozone July HICP m/m (exp –0.2%, prev 0.1%)
Eurozone July HICP y/y (exp 1.8%, prev 1.9%)
At 8:30 AM US Weekly Jobless Claims (exp 313.0k, prev 316.0k)
US July Housing Starts (exp 1.405 mln units, prev 1.467 mln units)
US July Building Permits (exp 1.40 mln units, prev 1.413 mln units)
At 12:00 PMAugust Philadelphia Fed Survey (exp 9.0, prev 9.2)
With heightened risk aversion driving markets, the dollar and yen continue to benefit, while the British pound and euro remain laggards. US equities took another hit with the Dow losing over 167-pts on Wednesday as burgeoning fears of spillover from the subprime debacle linger. The increased cautiousness will likely prop the yen higher across the board as heavy unwinding of the carry trades persist.
US data due out today include weekly jobless claims, July housing starts, July building permits and the August Philadelphia Fed survey. Weekly jobless claims are seen slipping slightly to 313k, down from the previous week at 316k. Housing starts and building permits are both forecasted to reflect continued deterioration in the housing market, falling to 1.405 mln units and 1.40 mln units, respectively. Lastly, the August Philadelphia Fed survey is expected to slip to 9.0, down from 9.2 in July.
Germany July HICP y/y (exp 2.0%, prev 2.0%)
Germany July CPI m/m (exp 0.4%, prev 0.1%)
Germany July CPI y/y (exp 1.9%, prev 1.8%)
At 4:30 AM UK July Retail Sales m/m (exp 0.2%, prev 0.2%)
UK July Retail Sales y/y (exp 3.4%, prev 3.4%)
At 5:00 AM Eurozone July HICP m/m (exp –0.2%, prev 0.1%)
Eurozone July HICP y/y (exp 1.8%, prev 1.9%)
At 8:30 AM US Weekly Jobless Claims (exp 313.0k, prev 316.0k)
US July Housing Starts (exp 1.405 mln units, prev 1.467 mln units)
US July Building Permits (exp 1.40 mln units, prev 1.413 mln units)
At 12:00 PMAugust Philadelphia Fed Survey (exp 9.0, prev 9.2)
With heightened risk aversion driving markets, the dollar and yen continue to benefit, while the British pound and euro remain laggards. US equities took another hit with the Dow losing over 167-pts on Wednesday as burgeoning fears of spillover from the subprime debacle linger. The increased cautiousness will likely prop the yen higher across the board as heavy unwinding of the carry trades persist.
US data due out today include weekly jobless claims, July housing starts, July building permits and the August Philadelphia Fed survey. Weekly jobless claims are seen slipping slightly to 313k, down from the previous week at 316k. Housing starts and building permits are both forecasted to reflect continued deterioration in the housing market, falling to 1.405 mln units and 1.40 mln units, respectively. Lastly, the August Philadelphia Fed survey is expected to slip to 9.0, down from 9.2 in July.
Markets to Consolidate This Week after Fed's Discount Rate Cut
Fed's 50 bps discount rate cut on Friday stabilized the markets which was in massive carry trade unwinding as the subprime mortgage crisis spread through global credit markets. But still, the ultimate carry trade pair, NZDJPY tumbled near to 10% while AUD/JPY also dropped close to 9%. High yielding currencies and European majors except the Swissy, were hammered much lower too before late Friday's recovery. Important technical levels were taken out in most pairs that signaled at least a medium term reversal. However, as a short term top/bottom should be in place after Fed stepped in, and with a rather light calendar, more consolidation could be seen this week before extending the reversed trend.
The greenback did ride on carry trade unwinding and surged against most currencies except the yen on flight-to-safety flows. Fed's unexpected discount rate cut from 6.25% to 5.75% has stabilized the financial markets and triggered some retreat in the greenback too. To be clear, the discount rate is the rate that the Fed charges to lend money directly to banks and other lending institutions. Meanwhile, the commonly talked about Fed Funds Rate is that the rate that banks ay to borrow from the marketplace. In addition to lower the rates, the Fed also allow terms of financing to extend to 30 days. Most importantly, in the statement, the Fed acknowledged that "Financial market conditions have deteriorated, and tighter credit conditions and increased uncertainty have the potential to restrain economic growth going forward". Downside risks to growth have "increased appreciably". Altogether, even though the act did stabilized the markets and suggest that Fed is openings door to turning bias to neutral and even pathing the way to a Fed Fund rate cut, it is taken as a confirmation of the acknowledgement of the seriousness of the subprime problem. In other words, more bad news could still come in the near future and markets will continue to be vulnerable to them. The discount rate cut, and even a Fed Fund rate cut could halt the current liquidation of riskier assets but the trend will likely continue.
The greenback did ride on carry trade unwinding and surged against most currencies except the yen on flight-to-safety flows. Fed's unexpected discount rate cut from 6.25% to 5.75% has stabilized the financial markets and triggered some retreat in the greenback too. To be clear, the discount rate is the rate that the Fed charges to lend money directly to banks and other lending institutions. Meanwhile, the commonly talked about Fed Funds Rate is that the rate that banks ay to borrow from the marketplace. In addition to lower the rates, the Fed also allow terms of financing to extend to 30 days. Most importantly, in the statement, the Fed acknowledged that "Financial market conditions have deteriorated, and tighter credit conditions and increased uncertainty have the potential to restrain economic growth going forward". Downside risks to growth have "increased appreciably". Altogether, even though the act did stabilized the markets and suggest that Fed is openings door to turning bias to neutral and even pathing the way to a Fed Fund rate cut, it is taken as a confirmation of the acknowledgement of the seriousness of the subprime problem. In other words, more bad news could still come in the near future and markets will continue to be vulnerable to them. The discount rate cut, and even a Fed Fund rate cut could halt the current liquidation of riskier assets but the trend will likely continue.
Dollar Fell after Fed Cut Discount Rate
The dollar fell after the Federal Reserve cut the discount rate by 50 percent to 5.75 percent and said that downside risks are on the rise. The euro rose as high as 1.3550 versus the dollar, while the sterling pared its earlier loss and climbed back to above 1.98 level against the dollar.
The Fed said in the statement that it is ¡°prepared to act as needed to mitigate the adverse effects on the economy arising from disruptions in financial markets.¡± The dollar rallied after the Fed cut window rates to increase liquidity in the market. The Dow Jones Industrial Average opened 300 points higher under the stimulus of the Fed¡¯s action.
Stocks pared half of its earlier gains as investors took a cautious stance and took profits before a US consumer sentiment report. The University of Michigan consumer sentiment fell from 90.4 in 83.3 in August, below the estimate of 88. The dollar edged down slightly after the below-the-expectation data.
The Fed said in the statement that it is ¡°prepared to act as needed to mitigate the adverse effects on the economy arising from disruptions in financial markets.¡± The dollar rallied after the Fed cut window rates to increase liquidity in the market. The Dow Jones Industrial Average opened 300 points higher under the stimulus of the Fed¡¯s action.
Stocks pared half of its earlier gains as investors took a cautious stance and took profits before a US consumer sentiment report. The University of Michigan consumer sentiment fell from 90.4 in 83.3 in August, below the estimate of 88. The dollar edged down slightly after the below-the-expectation data.
Yen Soars Most in 9 Years
The yen had its biggest one-day gain against the dollar since 1998 as investors rushed out of carry trades amid credit market panic.
Global stocks tumbled today on fears of a funding crisis. The Dow Jones Industrial Averages were down more than 340 points in intraday trading, but rebounded at closing with a loss of just 13. The Fed injected 517 billion to banking system to ease liquidity needs. Short yen carry trades positions were unwounded as investors avoid risky investment in today¡¯s financial market turmoil.
As a result, high-yielding currencies, such as the Australian dollar, New Zealand dollar, and sterling, suffered steep losses. The Australian dollar fell from 0.82 to near 0.78 in intraday trading, the biggest drop in 21 years.
Global stocks tumbled today on fears of a funding crisis. The Dow Jones Industrial Averages were down more than 340 points in intraday trading, but rebounded at closing with a loss of just 13. The Fed injected 517 billion to banking system to ease liquidity needs. Short yen carry trades positions were unwounded as investors avoid risky investment in today¡¯s financial market turmoil.
As a result, high-yielding currencies, such as the Australian dollar, New Zealand dollar, and sterling, suffered steep losses. The Australian dollar fell from 0.82 to near 0.78 in intraday trading, the biggest drop in 21 years.
Sunday
Dollar Slipped after FOMC
The Fed kept interest rates at 5.25% unchanged as widely expected. The Fed acknowledged tightening credit conditions and slowing economy, but maintained its bias against inflationary pressure for fear that inflation may not moderate as expected. The dollar fell slightly against the euro and sterling after the post-meeting statement.
The euro will face resistance at 1.3750, followed by 1.3780 and 1.38. Additional gains will target 1.3830 and 1.3850. Meanwhile, on the downside the pair will encounter support at 1.3720 followed by 1.37 and 1.3680. Subsequent floors will emerge at 1.3650, backed by 1.3620 and 1.36.
The euro will face resistance at 1.3750, followed by 1.3780 and 1.38. Additional gains will target 1.3830 and 1.3850. Meanwhile, on the downside the pair will encounter support at 1.3720 followed by 1.37 and 1.3680. Subsequent floors will emerge at 1.3650, backed by 1.3620 and 1.36.
Rate Sentiment Drives FX
The dollar was mixed in the Wednesday session amid a dearth of fresh US economic news, climbing higher against the yen but falling sharply versus the sterling. The data release was limited to June wholesale inventories, which was slightly higher than expected at 0.5%, unchanged from the previous month. Interest rate expectations continue to play a key role in the FX market, with the Aussie and sterling regaining its footing on hawkish sentiment from both respective central banks.
Sterling Shines
The sterling rallied sharply against the dollar and yen overnight, climbing just shy of the 2.04-level and slightly above 244, respectively. The strength was predominantly triggered the Bank of England’s Quarterly Inflation Report, which revealed expectations for CPI inflation to be slightly above the 2% target in two years with market rates, and clearly above target based on constant rates. The BoE said that risks to inflation remained skewed to the upside but with growth now forecasted to be softer over the next two years.
Sterling Shines
The sterling rallied sharply against the dollar and yen overnight, climbing just shy of the 2.04-level and slightly above 244, respectively. The strength was predominantly triggered the Bank of England’s Quarterly Inflation Report, which revealed expectations for CPI inflation to be slightly above the 2% target in two years with market rates, and clearly above target based on constant rates. The BoE said that risks to inflation remained skewed to the upside but with growth now forecasted to be softer over the next two years.
Yen Rallied after BNP Froze Funds
The yen rose sharply BNP Paribas, France’s biggest bank, froze three investment funds worth 1.6 billion euros, raising concern the US subprime mortgage sector woes is spreading worldwide. The ECB today injected 94.8 billion euros into the region’s banking market to meet the sudden liquidity demand. The US subprime worries prompted investors to unwind carry trades, driving the yen higher against high-yielding currencies.
The euro slumped from 165 to 161.55 versus the yen, while the sterling slid from 244 to test the 239 level. The yen strengthened from 119.75 to as low as 118.20 versus the dollar.
As a safe haven currency, the dollar also benefited from anti-risk trades. The euro fell off the 1.38 handle and was supported by the 1.3650 level versus the dollar. The sterling dipped from 2.04 to as low as 2.0212.
The euro slumped from 165 to 161.55 versus the yen, while the sterling slid from 244 to test the 239 level. The yen strengthened from 119.75 to as low as 118.20 versus the dollar.
As a safe haven currency, the dollar also benefited from anti-risk trades. The euro fell off the 1.38 handle and was supported by the 1.3650 level versus the dollar. The sterling dipped from 2.04 to as low as 2.0212.
Yen Crosses Could Stabilize ,Short Term Risk Remains on Downside
Euro and Sterling stabilize a bit against dollar today as the greenback is dragged further down by selling in USD/JPY. Though, the high yielding commodities are still the biggest victims of the current carry trade unwinding. Fed fund rate surged to as high as 6%, well above Fed's target rate of 5.25% earlier today and triggered the Fed to add another $19 b in temporary funds to the banking system through the purchase of mortgage-backed securities to help meet demand for cash. On the other hand, ECB also loaned another 61.05b euros into the banking system. Sentiments in the markets remains fragile as US stocks are set to open lower, following yesterday's sharp sell off and today's fall in Asian and European markets.
However, note the deeply oversold yen crosses are showing signs of stabilizing in intraday terms as US session approaches. We could see some sideway trading and recovery in yen crosses in the US sessions, provided that the stock markets also stabilize after initial fall. But still, the short term outlook in yen remains bullish, and any recovery in the yen crosses will be treated as 'recovery' only, and more downside is still expected to come next week.
However, note the deeply oversold yen crosses are showing signs of stabilizing in intraday terms as US session approaches. We could see some sideway trading and recovery in yen crosses in the US sessions, provided that the stock markets also stabilize after initial fall. But still, the short term outlook in yen remains bullish, and any recovery in the yen crosses will be treated as 'recovery' only, and more downside is still expected to come next week.
Euro/Dollar
EUR/USD edges further lower to 1.3643 today but stabilizes as no follow through selling is seen yet. Though, intraday bias will remain on the downside as long as 1.3713 minor resistance holds. Further decline is still in favor. As discussed before, EUR/USD should still be bounded in consolidation that started at 1.3851 and hence, another test of 1.3567/3658 support zone is expected to be seen before completing such consolidation. However, downside is also expected to be contained there.
Above 1.3713 minor resistance resistance will turn intraday outlook neutral and probably bring stronger recovery. But firm break of 1.3839 resistance is needed to confirm rise from 1.3262 has resumed. Otherwise, choppy sideway trading is still in progress.
In the bigger picture, firstly, the momentum of the rise from 1.3262 is seen stronger than the prior rally from 1.2865 to 1.3681. Secondly, the falling trend line in both daily MACD and RSI were broken, negating the bearish divergence conditions. In other words, the underlying bullishness in EUR/USD could be much stronger than we originally thought and the rise from 1.3262 could be part of another set of medium term rally instead of the last advance of a 5 wave rally from 1.2483 that we originally thought.
Focus remains on 1.3822/3851 resistance (100% projection of 1.1639 to 1.2978 from 1.2483 at 1.3822). Sustained trading above this level will add much weight to the case that whole medium term rally from 1.1639 is indeed resumption of multi-year up trend from 0.8223 (00 low). That is, further rise should be seen in medium term towards 95 high of 1.4523 with much chance to extend further to 61.8% projection of 0.8223 to 1.3668 from 1.1639 at 1.5004.
On the downside, break of 1.3481 will warn that 1.3851 could indeed be an important medium term top. 1.3262 low will be back into focus and break will indicate that medium term rally from 1.1639 has likely completed after being limited by 1.3822 resistance as originally expected.
Above 1.3713 minor resistance resistance will turn intraday outlook neutral and probably bring stronger recovery. But firm break of 1.3839 resistance is needed to confirm rise from 1.3262 has resumed. Otherwise, choppy sideway trading is still in progress.
In the bigger picture, firstly, the momentum of the rise from 1.3262 is seen stronger than the prior rally from 1.2865 to 1.3681. Secondly, the falling trend line in both daily MACD and RSI were broken, negating the bearish divergence conditions. In other words, the underlying bullishness in EUR/USD could be much stronger than we originally thought and the rise from 1.3262 could be part of another set of medium term rally instead of the last advance of a 5 wave rally from 1.2483 that we originally thought.
Focus remains on 1.3822/3851 resistance (100% projection of 1.1639 to 1.2978 from 1.2483 at 1.3822). Sustained trading above this level will add much weight to the case that whole medium term rally from 1.1639 is indeed resumption of multi-year up trend from 0.8223 (00 low). That is, further rise should be seen in medium term towards 95 high of 1.4523 with much chance to extend further to 61.8% projection of 0.8223 to 1.3668 from 1.1639 at 1.5004.
On the downside, break of 1.3481 will warn that 1.3851 could indeed be an important medium term top. 1.3262 low will be back into focus and break will indicate that medium term rally from 1.1639 has likely completed after being limited by 1.3822 resistance as originally expected.
GBP/Dollar
Cable edges further lower to 2.2154, breaking marginally below 2.0156 low but lacks follow through selling so far. As this point, further downside is still in favor as long as 2.0242 resistance holds. As discussed before, cable's correction from 2.0652 is still in progress and is expected to further test 2.0086/2.0206 support zone before completion. However as we'd expect such consolidation to be contained by this support zone, focus will be on reversal signal as the current fall proceeds.
Above 2.0242 will turn intraday outlook neutral first and probably bring strong recovery. But still, break of 2.0462 cluster resistance (61.8% retracement of 2.0652 to 2.0156 at 2.0463) is needed to confirm correction from 2.0652 has completed and bring retest of key medium term resistance of 61.8% projection of 1.3680 (01 low) to 1.9554 (05 high) from 1.7047 (05 low) at 2.0677. Otherwise, further downside is still in favor.
In the bigger picture, regardless of the internal structure, the whole rally from 1.7047 represents resumption of the long term up trend from 1.3680 and has almost met it's initial target of 2.0677 already. Even though a short term top is in place at 2.0652 the whole set of rally from 1.7047 should still be in good shape as long as 1.9621 support remains intact. Consolidation from 2.0652 should be relatively brief in medium term and further upside is still expected. Sustained trading above 2.0677 will target 2.1 psychological resistance first.
However, break of medium term rising trend line (now at 1.9916) will warn that the medium term rally has already topped out at 2.0652 after failing the 2.0677 target. Further break of 1.9621 support will encourage much deeper correction could be seen to 1.9183 support first and with prospect of further decline to long term rising trend line support (now at 1.8327).
Above 2.0242 will turn intraday outlook neutral first and probably bring strong recovery. But still, break of 2.0462 cluster resistance (61.8% retracement of 2.0652 to 2.0156 at 2.0463) is needed to confirm correction from 2.0652 has completed and bring retest of key medium term resistance of 61.8% projection of 1.3680 (01 low) to 1.9554 (05 high) from 1.7047 (05 low) at 2.0677. Otherwise, further downside is still in favor.
In the bigger picture, regardless of the internal structure, the whole rally from 1.7047 represents resumption of the long term up trend from 1.3680 and has almost met it's initial target of 2.0677 already. Even though a short term top is in place at 2.0652 the whole set of rally from 1.7047 should still be in good shape as long as 1.9621 support remains intact. Consolidation from 2.0652 should be relatively brief in medium term and further upside is still expected. Sustained trading above 2.0677 will target 2.1 psychological resistance first.
However, break of medium term rising trend line (now at 1.9916) will warn that the medium term rally has already topped out at 2.0652 after failing the 2.0677 target. Further break of 1.9621 support will encourage much deeper correction could be seen to 1.9183 support first and with prospect of further decline to long term rising trend line support (now at 1.8327).
Dollar/JPY
USD/JPY's fall from 119.80 extends further to as low as 117.20 today, inches above prior low of 117.15. At this point, further decline is expected to follow as long as 118.87 resistance holds. Break of 117.15 low will confirm recent sharp decline from 124.13 has resumed for 114.41/115.13 support zone. Above 118.22 will turn intraday outlook neutral and indicates that price actions from 117.15 is developing into further consolidation with another test of 119.81/89 cluster resistance (100% projection of 117.15 to 119.07 from 117.97 at 119.89 and 38.2% retracement of 124.13 to 117.15 at 119.81) before completion.
In the bigger picture, break of 118.35/57 cluster support zone (38.2% retracement of 108.99 to 124.13 at 118.35 and 61.8% retracement of 115.13 to 124.13 at 118.57) has also had medium term rising trend line (108.99 to 155.13, now at 118.39) taken out. Sustained trading below these levels argues that whole rise from 108.99 has completed. In such case, much deeper decline should then be seen to long term rising trend line support (now at 115.70) and then further to next important support zone of 114.41 and 115.13 (61.8% retracement of 108.99 to 124.13 at 114.77).
Sustained break of 114.41/115.13 support zone will strongly suggest that the whole multi year up trend from 101.65 is already completed and much stronger and sustainable rally in the Japanese yen should then be seen in medium term. However, note that strong rebound above 114.41/115.13 support zone or a break above 122.40 will save the case that long term up trend from 101.65 is still in force for another test of 124.13 high at least before completion.
In the bigger picture, break of 118.35/57 cluster support zone (38.2% retracement of 108.99 to 124.13 at 118.35 and 61.8% retracement of 115.13 to 124.13 at 118.57) has also had medium term rising trend line (108.99 to 155.13, now at 118.39) taken out. Sustained trading below these levels argues that whole rise from 108.99 has completed. In such case, much deeper decline should then be seen to long term rising trend line support (now at 115.70) and then further to next important support zone of 114.41 and 115.13 (61.8% retracement of 108.99 to 124.13 at 114.77).
Sustained break of 114.41/115.13 support zone will strongly suggest that the whole multi year up trend from 101.65 is already completed and much stronger and sustainable rally in the Japanese yen should then be seen in medium term. However, note that strong rebound above 114.41/115.13 support zone or a break above 122.40 will save the case that long term up trend from 101.65 is still in force for another test of 124.13 high at least before completion.
Saturday
Yen Buoyed, Traders Await Data
At 3:55 AM Germany July Manufacturing PMI (exp 56.8, prev 57.3)
At 4:00 AM Eurozone July Manufacturing PMI (exp 54.8, prev 55.6)
At 4:30 AM UK July Manufacturing CIPS/PMI (exp 54.0, prev 54.3)
At 8:15 AM US July ADP Employment (exp 100.0k, prev 150.0k)
At 10:00 AM US June Pending Home Sales (exp –0.6%, prev –3.5%)
US July Manufacturing ISM (exp 55.5, prev 56.0)
Heightened risk aversion continues to dictate the direction in the major currency pairs, with the yen reaping the benefits from safe haven flows as speculators scale back their carry trades. Meanwhile, the dollar also remains buoyed against the majors heading into the Wednesday session, hovering around 1.3660 versus the euro and 2.0282 against the sterling.
Economic data from the US continues to be patchy at best, with housing leading the declines, while the labor market and consumer confidence remain firm. The key highlight will be Friday’s July jobs report. Traders will look at the July ADP employment report as a proxy to this week’s non-farm payrolls data. The ADP private sector payrolls reading is seen dropping to 100k, down considerably from June at 150k jobs created. June pending home sales are forecasted to decline by 0.6%, which marks an improvement from the 3.5% drop in May. Lastly, the July manufacturing ISM reading is expected to fall to 55.5, versus 56.0 from June.
At 4:00 AM Eurozone July Manufacturing PMI (exp 54.8, prev 55.6)
At 4:30 AM UK July Manufacturing CIPS/PMI (exp 54.0, prev 54.3)
At 8:15 AM US July ADP Employment (exp 100.0k, prev 150.0k)
At 10:00 AM US June Pending Home Sales (exp –0.6%, prev –3.5%)
US July Manufacturing ISM (exp 55.5, prev 56.0)
Heightened risk aversion continues to dictate the direction in the major currency pairs, with the yen reaping the benefits from safe haven flows as speculators scale back their carry trades. Meanwhile, the dollar also remains buoyed against the majors heading into the Wednesday session, hovering around 1.3660 versus the euro and 2.0282 against the sterling.
Economic data from the US continues to be patchy at best, with housing leading the declines, while the labor market and consumer confidence remain firm. The key highlight will be Friday’s July jobs report. Traders will look at the July ADP employment report as a proxy to this week’s non-farm payrolls data. The ADP private sector payrolls reading is seen dropping to 100k, down considerably from June at 150k jobs created. June pending home sales are forecasted to decline by 0.6%, which marks an improvement from the 3.5% drop in May. Lastly, the July manufacturing ISM reading is expected to fall to 55.5, versus 56.0 from June.
Central Bank Decisions Eyed
At 5:00 AM Eurozone June PPI m/m (exp 0.3%, prev 0.3%)
Eurozone June PPI y/y (exp 2.3%, prev 2.3%)
At 7:00 AM BoE Monetary Policy Decision (exp 5.75%, prev 5.75%)
At 7:45 AM ECB Monetary Policy Decision (exp 4.0%, prev 4.0%)
At 8:30 AM ECB President Trichet Press Conference
US Weekly Jobless Claims (exp 310k, prev 301k)
At 10:00 AM US June Durable Goods Orders (exp 1.4%, prev 1.4%)
US June Factory Orders (exp 1.0%, prev –0.5%)
The major currencies are little changed heading into Thursday, with the dollar and yen maintaining their buoyant tone. US equities rebounded late in the session, briefly sending the yen lower toward the 119-level against the dollar and 163 versus the euro. Currencies will continue to be dictated by moves in the global equity bourses as fears of the subprime debacle fester in the background – prompting heightened risk aversion among traders.
In addition to closely monitoring equity performance, markets will look ahead to US weekly jobless claims, June durable goods orders and factory orders. Weekly jobless claims are seen creeping higher to 310k, up from 301k in the prior week. Durable goods orders, typically a volatile number, is seen unchanged in June at 1.4%, while factory orders are expected to reverse last month’s 0.5% decline, rising by 1.0% in June.
Eurozone June PPI y/y (exp 2.3%, prev 2.3%)
At 7:00 AM BoE Monetary Policy Decision (exp 5.75%, prev 5.75%)
At 7:45 AM ECB Monetary Policy Decision (exp 4.0%, prev 4.0%)
At 8:30 AM ECB President Trichet Press Conference
US Weekly Jobless Claims (exp 310k, prev 301k)
At 10:00 AM US June Durable Goods Orders (exp 1.4%, prev 1.4%)
US June Factory Orders (exp 1.0%, prev –0.5%)
The major currencies are little changed heading into Thursday, with the dollar and yen maintaining their buoyant tone. US equities rebounded late in the session, briefly sending the yen lower toward the 119-level against the dollar and 163 versus the euro. Currencies will continue to be dictated by moves in the global equity bourses as fears of the subprime debacle fester in the background – prompting heightened risk aversion among traders.
In addition to closely monitoring equity performance, markets will look ahead to US weekly jobless claims, June durable goods orders and factory orders. Weekly jobless claims are seen creeping higher to 310k, up from 301k in the prior week. Durable goods orders, typically a volatile number, is seen unchanged in June at 1.4%, while factory orders are expected to reverse last month’s 0.5% decline, rising by 1.0% in June.
USD Drifted Higher, Moving with Equities
The dollar still moves with the volatile stock market today as risk aversion drives the direction of carry trades, which dominates the currency market since last week. The dollar drifted slightly higher against the euro and yen.
In early US session, the dollar fell modestly after US ADP report showed only 48,000 jobs were added in private sector in July, far below the forecast of 100,000 and a 150,000 reading in the previous month. The euro tested the 1.37 handle against the dollar and dipped back to around 1.3670 later. There is no direct relationship between this private sector employment report and the non-farm payrolls. The market will focus on the key job report from US Labor Department this Friday for more clues on the broad labor market.
Besides, the other two US data did little to the market. US pending home sales rose 0.5% in June, beating the estimate of a 0.6% decline and a –3.5% reading in the previous month. However, it is the fact that the nation’s housing market is facing serious credit problems and a major downturn. A single second-tier housing report is not sufficient to change the evaluation of US housing market. US manufacturing ISM came out at 53.8, below the expectation of 55.5 and 56 in the earlier month.
In early US session, the dollar fell modestly after US ADP report showed only 48,000 jobs were added in private sector in July, far below the forecast of 100,000 and a 150,000 reading in the previous month. The euro tested the 1.37 handle against the dollar and dipped back to around 1.3670 later. There is no direct relationship between this private sector employment report and the non-farm payrolls. The market will focus on the key job report from US Labor Department this Friday for more clues on the broad labor market.
Besides, the other two US data did little to the market. US pending home sales rose 0.5% in June, beating the estimate of a 0.6% decline and a –3.5% reading in the previous month. However, it is the fact that the nation’s housing market is facing serious credit problems and a major downturn. A single second-tier housing report is not sufficient to change the evaluation of US housing market. US manufacturing ISM came out at 53.8, below the expectation of 55.5 and 56 in the earlier month.
$ Slid after Payrolls
The dollar slid broadly after US Labor Department July employment report showed new added jobs were less than expected, squeezing out the possibility of a rate hike by the Fed this year and raising speculation of a rate cut.
US non-farm payrolls came out at 92k, far below the estimate of 130k and a reading of 132k in the previous month. Unemployment rate increased from 4.5% to 4.6% in July. The labor market, one of the few fundamentals that always support the dollar in the past, turned from robust to modest, adding to the bearish sentiment on the dollar.
Besides, US non-manufacturing ISM fell from 60.7 to 55.8 in July, below the estimate of 59. The dollar extended its loss against the euro, sterling and yen.
US non-farm payrolls came out at 92k, far below the estimate of 130k and a reading of 132k in the previous month. Unemployment rate increased from 4.5% to 4.6% in July. The labor market, one of the few fundamentals that always support the dollar in the past, turned from robust to modest, adding to the bearish sentiment on the dollar.
Besides, US non-manufacturing ISM fell from 60.7 to 55.8 in July, below the estimate of 59. The dollar extended its loss against the euro, sterling and yen.
Dollar Down Slightly, Awaits US Payrolls
The dollar fell slightly against the euro and sterling as traders adjusted positions to wait for tomorrow’s US non-farm payrolls report, which will be a major market mover. The euro climbed 50 pips to test 1.37 level against the dollar, and the sterling rose from 2.0300 to as high as 2.0377 versus the dollar.
The euro and sterling was little changed after the European Central Bank and the Bank of England left interest rates on hold as expected at 4.00% and 5.75% respectively. ECB President Trichet said at the post-meeting press conference that “strong vigilance” is needed to contain inflation, signaling a possible rate hike in September.
The dollar was flat after Today’s data as traders keep cautious before Friday morning’s key job report. US jobless claims for the week ended on July 28 came out at 307k, in line with the expectation of 310k. Factory orders rose 0.6% in June, reversing a 0.5% decline in the earlier month but below the estimate of 1.0%. Durable goods orders came out at 1.3%, slightly below the forecast and the previous reading of 1.4%.
The euro and sterling was little changed after the European Central Bank and the Bank of England left interest rates on hold as expected at 4.00% and 5.75% respectively. ECB President Trichet said at the post-meeting press conference that “strong vigilance” is needed to contain inflation, signaling a possible rate hike in September.
The dollar was flat after Today’s data as traders keep cautious before Friday morning’s key job report. US jobless claims for the week ended on July 28 came out at 307k, in line with the expectation of 310k. Factory orders rose 0.6% in June, reversing a 0.5% decline in the earlier month but below the estimate of 1.0%. Durable goods orders came out at 1.3%, slightly below the forecast and the previous reading of 1.4%.
Thursday
FX Sideways Ahead of BoC
At 2:00 AM Germany June WPI m/m (exp 0.3%, prev 0.3%)
Germany June WPI y/y (exp 2.1%, prev 2.4%)
At 8:15 AM Canada June Housing Starts (exp 216.5k, prev 229.7k)
At 9:00 AM Bank of Canada Monetary Policy Decision (exp 4.5%, prev 4.25%)
At 10:00 AM US May Wholesale Inventories (exp 0.4%, prev 0.3%)
The major currency pairs are little changed in early Tuesday trading amid a dearth of fresh news. The dollar continues to hover near 1.3620 against the euro and 2.0156 versus the sterling.
The US economic calendar will see US May wholesale inventories at 10:00 AM, forecasted to edge up marginally to 0.4% from 0.3% in April. However, the key point of focus among traders in the Tuesday session will be Fed Chairman Bernanke’s speech on inflation to the NBER.
Germany June WPI y/y (exp 2.1%, prev 2.4%)
At 8:15 AM Canada June Housing Starts (exp 216.5k, prev 229.7k)
At 9:00 AM Bank of Canada Monetary Policy Decision (exp 4.5%, prev 4.25%)
At 10:00 AM US May Wholesale Inventories (exp 0.4%, prev 0.3%)
The major currency pairs are little changed in early Tuesday trading amid a dearth of fresh news. The dollar continues to hover near 1.3620 against the euro and 2.0156 versus the sterling.
The US economic calendar will see US May wholesale inventories at 10:00 AM, forecasted to edge up marginally to 0.4% from 0.3% in April. However, the key point of focus among traders in the Tuesday session will be Fed Chairman Bernanke’s speech on inflation to the NBER.
USD Mired Near Lows
The dollar’s woes were exacerbated as more evidence of problems in the subprime mortgage market were revealed yesterday – triggering a sharp sell-off to record lows against the euro at 1.3786 and a new 26-year low versus the sterling at 2.0285. The heightened risk aversion also prompted speculators to scale back carry trade positions, sending the yen sharply higher – climbing to 120.96 versus the greenback and recovered from all-time lows against the euro.
The main catalyst was attributed to S&P’s announcement that it would possibly downgrade nearly $12 billion in subprime mortgage-backed US bonds. The move could potentially add more instability to financial markets and raising warning flags of spillover effects to other sectors of the economy. Also boding poorly for the housing market and consequently, the US economy were earnings reports – in which Home Depot signaled further weakness ahead by issuing profit warnings due to the housing slump.
The main catalyst was attributed to S&P’s announcement that it would possibly downgrade nearly $12 billion in subprime mortgage-backed US bonds. The move could potentially add more instability to financial markets and raising warning flags of spillover effects to other sectors of the economy. Also boding poorly for the housing market and consequently, the US economy were earnings reports – in which Home Depot signaled further weakness ahead by issuing profit warnings due to the housing slump.
Dollar Fell on Subprime Worries
The greenback suffered further losses on Tuesday as more negative news related to the deteriorating subprime mortgage market was reported.
Two world’s largest credit rating agencies, Standard & Poor’s and Moody’s, today warned of ratings cut on over $17 billion risky mortgages debt, most of which are subprime loans. Coupled with profit warnings from homebuilder and home appliance retailers, subprime debt rating downgrading lead investors highly worried about the subprime issue in US housing market and the severe impact it may spread into the broader economy. The euro formed a base at 1.3730 and refreshed record high to 1.3783 versus the dollar. Following yesterday’s rally, the British pound gained another 1 cent to as high as 2.0361 against the dollar.
The euro was also boosted by hawkish comments from the European Central Bank officials. ECB President Trichet reiterated that the bank’s monetary policy remained accommodative, signaling further interest rate increases. ECB executive board member, Jurgen Stark, said today that euro appreciation reflected the strength of economic growth in Europe.
Two world’s largest credit rating agencies, Standard & Poor’s and Moody’s, today warned of ratings cut on over $17 billion risky mortgages debt, most of which are subprime loans. Coupled with profit warnings from homebuilder and home appliance retailers, subprime debt rating downgrading lead investors highly worried about the subprime issue in US housing market and the severe impact it may spread into the broader economy. The euro formed a base at 1.3730 and refreshed record high to 1.3783 versus the dollar. Following yesterday’s rally, the British pound gained another 1 cent to as high as 2.0361 against the dollar.
The euro was also boosted by hawkish comments from the European Central Bank officials. ECB President Trichet reiterated that the bank’s monetary policy remained accommodative, signaling further interest rate increases. ECB executive board member, Jurgen Stark, said today that euro appreciation reflected the strength of economic growth in Europe.
Dollar Weak on Subprime Concern
The dollar remains under pressure from the deteriorating subprime mortgage market. The euro set a record high at 1.3797 versus the dollar and the sterling hovers around high levels 2.03.
The market was shocked by continuous warnings on the housing sector this week. Large home appliances retailers lowered profit forecasts, and Standard & Poor’s and Moody’s may downgrade credit rating of over $17 billion debt backed mostly by subprime mortgage. According to Bloomberg, mortgage foreclosures rose 56% year on year to 926k in the first half of this year, in June the rise is a scary 87%. This underlines the fact that the US housing market is melting down and the impact may spread into the broader economy.
Economic data from US today came out in line with expectations and did not impact the dollar much. Trade deficit rose from 58.5 billion to 60 billion in May as expected. Weekly jobless claims came out at 308k, better than the estimate of 315k and the prior reading of 318k.
The market was shocked by continuous warnings on the housing sector this week. Large home appliances retailers lowered profit forecasts, and Standard & Poor’s and Moody’s may downgrade credit rating of over $17 billion debt backed mostly by subprime mortgage. According to Bloomberg, mortgage foreclosures rose 56% year on year to 926k in the first half of this year, in June the rise is a scary 87%. This underlines the fact that the US housing market is melting down and the impact may spread into the broader economy.
Economic data from US today came out in line with expectations and did not impact the dollar much. Trade deficit rose from 58.5 billion to 60 billion in May as expected. Weekly jobless claims came out at 308k, better than the estimate of 315k and the prior reading of 318k.
Dollar Slumped vs Euro, Sterling
The dollar fell sharply against the euro and sterling on the disparity between the Fed and the other two central banks in monetary policy outlook.
The Fed yesterday left its interest rate unchanged at 5.25% as expected. The post-meeting statement pointed out that the inflation is still the Fed¡¯s predominant concern, reinforcing the expectations that the Fed would not cut rate within the year. While on the other side of the world, the European Central Bank and the Bank of England are widely anticipated to lift interest rates at least one more time this year. The euro rose above the 1.35 level versus the dollar, the first time in three weeks. Should the pair stand firmly above the 1.3460-80 support area, further rally may extend to 1.3660 with a near target at 1.3550.
After breaking through the key psychological level at 2 yesterday, the sterling extended its gains to as high as 2.0073 against the dollar on Friday. The currency is supported by the speculation that the Bank of England may raise rates as early as July.
The Fed yesterday left its interest rate unchanged at 5.25% as expected. The post-meeting statement pointed out that the inflation is still the Fed¡¯s predominant concern, reinforcing the expectations that the Fed would not cut rate within the year. While on the other side of the world, the European Central Bank and the Bank of England are widely anticipated to lift interest rates at least one more time this year. The euro rose above the 1.35 level versus the dollar, the first time in three weeks. Should the pair stand firmly above the 1.3460-80 support area, further rally may extend to 1.3660 with a near target at 1.3550.
After breaking through the key psychological level at 2 yesterday, the sterling extended its gains to as high as 2.0073 against the dollar on Friday. The currency is supported by the speculation that the Bank of England may raise rates as early as July.
Wednesday
PCE, GDP, Consumer Confidence
- 21:30 EDT Australian Retails Sales numbers came in at 1.4%, the expected number was 1.0%. This is huge move and a big increase in inflationary numbers. The Trade Balance increased to -1.75B from the expected -1.1B, a sign that imports are exceeding exports in the region. 21:20 EDT Asian Equity Markets are tumbling over concerns that another Hedge Fund is unable to raise capital to cover over leveraged CDO’s. This will likely strengthen the Yen and may push up US Treasury Note yields, and that in turn could lead to US$ strength, if it does follow through. 19:05 EDT UK Consumer Confidence number just printed at 96, a increase on the expected number. These are coming in strong each month and confirms that the UK consumer is happy to spend.15:00 EDT Australian Retail Sales and Trade Balance are due out at 21:30 EDT tonight, both of which will have the ability to move prices. 10:00 EDT US Construction Spending, a record of the expenditure of builders on public and private projects, came in at -0.3%, much lower than last months read of 1.1%. The impact may be felt more in the Equity Markets, that impact however, may go on to affect Treasury Yields which in turn impacts the currency markets, if traders are patient enough to let the picture build. 10:00 EDT US Consumer Confidence numbers were in higher than expected with a strong read of 112.6, the highest this year and in contrast to the PCE numbers that just limped in-line. These numbers were collated before the Stock Market dropped the gains for the year last week. 09:45 EFT US Chicago Purchase Managers Index, the rate of business expansion in the region was due in at 59.0, down from the previous read of 60.2. The numbers printed at 53.4, quite a dramatic miss overall. No inflationary pressures for the Fed to worry about here. 08:45 EDT Consumer spending rose at the slowest pace in 9 months, with the PCE Deflator rising the least since 2004. The Fed uses the Deflator to strip out energy and food costs and this read showed a fairly dramatic overall slowdown when looking at a yearly rate. With house prices having to fall to eliminate the large inventory numbers the consumer is possibly coming under pressure to sustain the economic recovery in manufacturing and services. The numbers are by no means poor, they are however showing a slowdown that Traders will have to monitor next month.08:35 EDT Equity Markets globally have found strong buying pressure today, Treasury Yields are increasing as Traders see value in the Stock Market, well for today they do anyway. 08:30 EDT US Core PCE numbers came in very close to expected, with Income and Expenditure inline as well. No inflationary pressure in these numbers for the Fed to worry about, but housing fears may still come to the fore next month. 08:30 EDT Canadian GDP numbers came in at 0.3%, the expected rate of growth in goods and services was 0.4%. This is an increase on last month. 06:00 EDT The Confederation of British Industry, the CBI, revealed that UK Retail Sales trends showed an increase on the year-over-year numbers, but a slight decrease on the expected numbers for the next 12 months. 05:50 EDT Canadian GDP, the read on the value of Goods and Services produced, due for release at 08:30, is looking to increase to 0.4%. The recent run on the CAD may come into sharp focus if this number misses either way. 05:30 EDT UK Consumer Confidence levels dropped to the lowest this year, in at -6 compared to -3 last month. The read may help to confirm that the recent Bank of England Interest Rate hikes have started to have the effect of slowing the economic growth that was threatening to increase inflation. These numbers take on more importance than normal in the week of an Interest Rate decision from the BOE. 05:20 EDT US$ Traders will be closely watching the releases this morning as they will reveal numbers that the FOMC use to help decide economic strength. The Personal Consumption and Expenditure numbers are the Fed’s preferred gauge of near-term inflationary pressure, Income is looking to increase, whilst spending is looking to decrease. Consumer Confidence numbers are looking to increase from 103 to 105, a big increase considering the condition of the housing market, and Chicago PMI is looking to drop lower as the business activity may have slowed. 05:00 EDT The Unemployment rate in Euro Land held steady at 6.9%, as expected. Consumer Confidence was as expected at -2.0, the same read as last month. 05:00 EDT Euro Zone CPI, the read on inflation, dropped to 1.8% from the 2.0% expected. This is under the ECB’s target rate and reduces dramatically the chances of the Central Bank raising Interest Rates on Thursday. 04:00 EDT German Unemployment stayed at 9.0%, a read that is under the recent 10% average, as Retail Sales increased from -2.5% last month to 0.7% now.02:00 EDT Australia has a big night of economic releases coming. The Retail Sales numbers are looking for a big increase to 1.0%, that will add to the pressure on the RBA to look hard at raising rates at the next meeting. The CPI number has already shown inflationary pressures and the last time it read as strong as this a rate hike followed. The Trade Balance is expected to decrease from -0.8b to -1.1b. Both numbers are out at 21:00 Tuesday. 00:00 EDT New Zealand Business Confidence numbers came in at -39, down from -37 last month. Higher interest rates, at 8.25%, are finally affecting business outlooks for the coming year.
4X Quiet, Awaits ECB, BoE
At 1:00 AM Japan May Leading Indicator (exp n/f, prev 18.2)
Japan May Coincident Indicator (exp n/f, prev 65.0)
At 4:30 AM UK May Manufacturing Production m/m (exp 0.3%, prev 0.3%)
UK May Manufacturing Production y/y (exp 0.9%, prev 1.3%)
UK May Industrial Production m/m (exp 0.3%, prev 0.3%)
UK May Industrial Production y/y (exp 0.3%, prev 0.4%)
At 6:00 AM Germany May Industrial Production m/m (exp 0.5%, prev –1.2%)
At 7:00 AM Bank of England Monetary Policy Decision (exp 5.75%, prev 5.5%)
At 7:45 AM ECB Monetary Policy Decision (exp 4.25%, prev 4.0%)
At 8:15 AM US June ADP Payrolls (exp 100k, prev 97k)
At 8:30 AM Canada Building Permits (exp 5.6%, prev –8.4%)
ECB President Trichet’s Press Conference
The dollar continues to trade on weak footing versus the majors, mired near 26-year lows against the sterling and around the 1.36-level against the euro. Central Bank monetary policy announcements will garner the lion’s share of market attention in the coming session, as traders eagerly await the rate decisions from the European Central Bank and the Bank of England. The sterling remains favored, hovering near its highest level in 26-years as markets anticipate further tightening from the BoE over the coming months to combat lingering inflationary pressure in the economy.
The US economic calendar for Thursday is light, seeing only the release of the June ADP payrolls report – which is forecasted to remain largely unchanged up 3k to 100k. Traders will also analyze the ADP payrolls as a proxy to Friday’s more important US jobs report. The June non-farm payrolls figure is expected to decline to 120k, from 157k in May. Meanwhile, the unemployment rate is forecasted to remain unchanged at 4.5%.
Japan May Coincident Indicator (exp n/f, prev 65.0)
At 4:30 AM UK May Manufacturing Production m/m (exp 0.3%, prev 0.3%)
UK May Manufacturing Production y/y (exp 0.9%, prev 1.3%)
UK May Industrial Production m/m (exp 0.3%, prev 0.3%)
UK May Industrial Production y/y (exp 0.3%, prev 0.4%)
At 6:00 AM Germany May Industrial Production m/m (exp 0.5%, prev –1.2%)
At 7:00 AM Bank of England Monetary Policy Decision (exp 5.75%, prev 5.5%)
At 7:45 AM ECB Monetary Policy Decision (exp 4.25%, prev 4.0%)
At 8:15 AM US June ADP Payrolls (exp 100k, prev 97k)
At 8:30 AM Canada Building Permits (exp 5.6%, prev –8.4%)
ECB President Trichet’s Press Conference
The dollar continues to trade on weak footing versus the majors, mired near 26-year lows against the sterling and around the 1.36-level against the euro. Central Bank monetary policy announcements will garner the lion’s share of market attention in the coming session, as traders eagerly await the rate decisions from the European Central Bank and the Bank of England. The sterling remains favored, hovering near its highest level in 26-years as markets anticipate further tightening from the BoE over the coming months to combat lingering inflationary pressure in the economy.
The US economic calendar for Thursday is light, seeing only the release of the June ADP payrolls report – which is forecasted to remain largely unchanged up 3k to 100k. Traders will also analyze the ADP payrolls as a proxy to Friday’s more important US jobs report. The June non-farm payrolls figure is expected to decline to 120k, from 157k in May. Meanwhile, the unemployment rate is forecasted to remain unchanged at 4.5%.
Dollar Rebounded on Robust ISM
The dollar climbed up from lows versus the euro and sterling and stabilized after mixed data from US today. The euro stepped back to below 1.38 area after reaching all-time high at 1.3813 versus the dollar. The sterling hovers above the 2.03 level against the dollar.
Early in the morning, a surprisingly disappointing retail sales report pushed the dollar to fresh all-time low versus the euro. US retail sales fell 0.9% in June, far below the estimate of a 0.1% increase. Excluding autos, core retail sales dropped 0.4%, also falling short of a call for a 0.2% rise.
The dollar was steady after robust consumer sentiment released later in the trading session. University of Michigan sentiment index rose to 92.4 in June, up from 85.3 in the prior month. Besides, US business inventories for June came out at 0.5%, beating the estimate of 0.3%.
Early in the morning, a surprisingly disappointing retail sales report pushed the dollar to fresh all-time low versus the euro. US retail sales fell 0.9% in June, far below the estimate of a 0.1% increase. Excluding autos, core retail sales dropped 0.4%, also falling short of a call for a 0.2% rise.
The dollar was steady after robust consumer sentiment released later in the trading session. University of Michigan sentiment index rose to 92.4 in June, up from 85.3 in the prior month. Besides, US business inventories for June came out at 0.5%, beating the estimate of 0.3%.
$ Steady on Mixed Data
The dollar climbed up from lows versus the euro and sterling and stabilized after mixed data from US today. The euro stepped back to below 1.38 area after reaching all-time high at 1.3813 versus the dollar. The sterling hovers above the 2.03 level against the dollar.
Early in the morning, a surprisingly disappointing retail sales report pushed the dollar to fresh all-time low versus the euro. US retail sales fell 0.9% in June, far below the estimate of a 0.1% increase. Excluding autos, core retail sales dropped 0.4%, also falling short of a call for a 0.2% rise.
The dollar was steady after robust consumer sentiment released later in the trading session. University of Michigan sentiment index rose to 92.4 in June, up from 85.3 in the prior month. Besides, US business inventories for June came out at 0.5%, beating the estimate of 0.3%.
Early in the morning, a surprisingly disappointing retail sales report pushed the dollar to fresh all-time low versus the euro. US retail sales fell 0.9% in June, far below the estimate of a 0.1% increase. Excluding autos, core retail sales dropped 0.4%, also falling short of a call for a 0.2% rise.
The dollar was steady after robust consumer sentiment released later in the trading session. University of Michigan sentiment index rose to 92.4 in June, up from 85.3 in the prior month. Besides, US business inventories for June came out at 0.5%, beating the estimate of 0.3%.
USD Mixed, Awaits Fed Speak
At 1:00 AM Japan June Economy Watchers Diffusion Index (exp n/f, prev 46.8)
At 2:00 AM Germany May Trade Balance (exp 16.0 bln euros, prev 15.8 bln euros)
At 4:30 AM UK June core PPI m/m (exp 0.3%, prev 0.2%)
UK June core PPI y/y (exp 2.3%, prev 2.3%)
At 6:00 AM UK May Total Industrial Production m/m (exp 1.8%, prev –2.3%)
At 3:00 PM US May Consumer Credit (exp $6.0 bln, prev $2.6 bln)
The dollar is mixed against the majors at the start of the week, higher against the yen but mired near its lows versus the euro and sterling. The key driver in currency moves continues to be sentiment over the outlook for global interest rates, with the euro reaping the rewards for expectations of continued tightening from the ECB – propping the currency to near record highs against the dollar and yen.
The US economic calendar for the week ahead is light, consisting of wholesale inventories, business inventories, retail sales, trade balance, and the University of Michigan consumer sentiment survey. The key highlights will be speeches from Fed officials, including Chairman Bernanke, who discusses inflation with the NBER, Board member Plosser, who speaks about housing prices and policy, as well as from Board members Yellen and Kroszner. Markets will gauge the prospects for shift in Fed stance over the coming months. However, given the combination of recent economic data and commentary from Fed officials, the most likely scenario to materialize over the coming months will be an unchanged stance from the FOMC.
At 2:00 AM Germany May Trade Balance (exp 16.0 bln euros, prev 15.8 bln euros)
At 4:30 AM UK June core PPI m/m (exp 0.3%, prev 0.2%)
UK June core PPI y/y (exp 2.3%, prev 2.3%)
At 6:00 AM UK May Total Industrial Production m/m (exp 1.8%, prev –2.3%)
At 3:00 PM US May Consumer Credit (exp $6.0 bln, prev $2.6 bln)
The dollar is mixed against the majors at the start of the week, higher against the yen but mired near its lows versus the euro and sterling. The key driver in currency moves continues to be sentiment over the outlook for global interest rates, with the euro reaping the rewards for expectations of continued tightening from the ECB – propping the currency to near record highs against the dollar and yen.
The US economic calendar for the week ahead is light, consisting of wholesale inventories, business inventories, retail sales, trade balance, and the University of Michigan consumer sentiment survey. The key highlights will be speeches from Fed officials, including Chairman Bernanke, who discusses inflation with the NBER, Board member Plosser, who speaks about housing prices and policy, as well as from Board members Yellen and Kroszner. Markets will gauge the prospects for shift in Fed stance over the coming months. However, given the combination of recent economic data and commentary from Fed officials, the most likely scenario to materialize over the coming months will be an unchanged stance from the FOMC.
FX Sideways, Awaits Data
At 12:30 AM Japan May Capacity Utilization (exp n/f, prev –1.6%)
Japan May Industrial Production (exp n/f, prev –0.4%)
At 2:00 AM Bank of Japan July Report
At 5:00 AM Eurozone May Industrial Production m/m (exp 1.0%, prev –0.8%)
Eurozone May Industrial Production y/y (exp 3.0%, prev 3.3%)
Eurozone Q1 GDP q/q (exp 0.6%, prev 0.9%)
Eurozone Q1 GDP y/y (exp 3.0%, prev 3.3%)
At 8:30 AM US Weekly Jobless Claims (exp 315k, prev 318k)
US May Trade Deficit (exp $60.0 bln, prev $58.5 bln)
Canada May Trade Balance (exp C$5.5bln, prev C$5.76bln)
The greenback continues to reel from burgeoning fears that the subprime mortgage debacle will extend into other sectors, aggravating the already slowing
US economy. The currency remains mired near all-time lows against the euro near 1.3750, while the sterling hovers around 26-year highs at 2.0316. The possible downgrades from S&P’s and Moody’s reinforce qualms that the implications of further deterioration in subprime mortgages may have been initially underestimated, with the impact reverberating throughout the financial markets.
US economic data slated for release on Thursday include weekly jobless claims and the May trade deficit. Initial jobless claims are largely unchanged, down marginally to 315k versus 318k from the previous week. Meanwhile, the May US trade deficit is forecasted to edge higher following April’s smaller-than-expected deficit – back up to $60 billion from $58.5 billion. The April report, however, revealed a burgeoning deficit with China at $19.5 billion, and given China’s recent record surplus – we expect the US-China trade gap to expand further and prompting renewed political jawboning for yuan revaluation.
Japan May Industrial Production (exp n/f, prev –0.4%)
At 2:00 AM Bank of Japan July Report
At 5:00 AM Eurozone May Industrial Production m/m (exp 1.0%, prev –0.8%)
Eurozone May Industrial Production y/y (exp 3.0%, prev 3.3%)
Eurozone Q1 GDP q/q (exp 0.6%, prev 0.9%)
Eurozone Q1 GDP y/y (exp 3.0%, prev 3.3%)
At 8:30 AM US Weekly Jobless Claims (exp 315k, prev 318k)
US May Trade Deficit (exp $60.0 bln, prev $58.5 bln)
Canada May Trade Balance (exp C$5.5bln, prev C$5.76bln)
The greenback continues to reel from burgeoning fears that the subprime mortgage debacle will extend into other sectors, aggravating the already slowing
US economy. The currency remains mired near all-time lows against the euro near 1.3750, while the sterling hovers around 26-year highs at 2.0316. The possible downgrades from S&P’s and Moody’s reinforce qualms that the implications of further deterioration in subprime mortgages may have been initially underestimated, with the impact reverberating throughout the financial markets.
US economic data slated for release on Thursday include weekly jobless claims and the May trade deficit. Initial jobless claims are largely unchanged, down marginally to 315k versus 318k from the previous week. Meanwhile, the May US trade deficit is forecasted to edge higher following April’s smaller-than-expected deficit – back up to $60 billion from $58.5 billion. The April report, however, revealed a burgeoning deficit with China at $19.5 billion, and given China’s recent record surplus – we expect the US-China trade gap to expand further and prompting renewed political jawboning for yuan revaluation.
Dollar Slumped on Housing Warnings
The dollar fell sharply across the board as news about the subprime sector raised worries over the nation’s housing market and the whole economy. US stock market and bond yields were also hit by the housing warnings.
Two large home appliance retailers, Home Depot and Sears, both lowered their sales and earnings forecasts due to weak housing market. The nation’s second largest homebuilder, DR Horton, reported its third quarter orders dropped 40%.
The euro rose 1 cent to an all-time high at 1.3739 versus the dollar. The British pound also strengthened sharply against the dollar, to as high as 2.0273. The yen rebounded against the ailing dollar, down from above 123 to test the 122 level. Should the yen break the key support at 121.80, the correction may extend further to 120.
Two large home appliance retailers, Home Depot and Sears, both lowered their sales and earnings forecasts due to weak housing market. The nation’s second largest homebuilder, DR Horton, reported its third quarter orders dropped 40%.
The euro rose 1 cent to an all-time high at 1.3739 versus the dollar. The British pound also strengthened sharply against the dollar, to as high as 2.0273. The yen rebounded against the ailing dollar, down from above 123 to test the 122 level. Should the yen break the key support at 121.80, the correction may extend further to 120.
Markets Await US Jobs Data
At 4:30 AM UK May Industrial Production m/m (exp 0.3%, prev 0.3%)
UK May Industrial Production y/y (exp 0.3%, prev 0.4%)
UK May Manufacturing Production m/m (exp 0.3%, prev 0.3%)
At 7:00 AM Canada June Unemployment Rate (exp 6.1%, prev 6.1%)
Canada June Jobs-Change (exp 17.0k, prev 9.3k)
At 8:30 AM US June Unemployment Rate (exp 4.5%, prev 4.5%)
US June non-farm payrolls (exp 120k, prev 157k)
US June Avg Earnings (exp 0.3%, prev 0.3%)
Correction: UK industrial & manufacturing production were included in yesterday’s preview but are scheduled for release today.
The major currency pairs consolidated in a narrow range during the quiet Asian session, with the dollar mired near its lows across the board. The greenback continues to struggle near 26-year lows versus the sterling around 2.0124 and creeps closer toward its all-time low against the euro near the 1.36-level.
UK May Industrial Production y/y (exp 0.3%, prev 0.4%)
UK May Manufacturing Production m/m (exp 0.3%, prev 0.3%)
At 7:00 AM Canada June Unemployment Rate (exp 6.1%, prev 6.1%)
Canada June Jobs-Change (exp 17.0k, prev 9.3k)
At 8:30 AM US June Unemployment Rate (exp 4.5%, prev 4.5%)
US June non-farm payrolls (exp 120k, prev 157k)
US June Avg Earnings (exp 0.3%, prev 0.3%)
Correction: UK industrial & manufacturing production were included in yesterday’s preview but are scheduled for release today.
The major currency pairs consolidated in a narrow range during the quiet Asian session, with the dollar mired near its lows across the board. The greenback continues to struggle near 26-year lows versus the sterling around 2.0124 and creeps closer toward its all-time low against the euro near the 1.36-level.
Dollar Eased as Stocks Rebound
The dollar gave back some of last week’s gains as investors risk aversion eased after global stock market rebounded today. The euro tested the 1.37 handle against the dollar, while the sterling remained above the 2.02 support level.
After the huge decline in last week, the Standard & Poor’s 500 index today surged 1.15% to 1475.70. The Dow Jones industrial average roses more than 100 points. The rebound in equities reduced risk aversion towards risky investments. As a result, the safe haven currency, the US dollar, lost its lust and fell slightly.
This week’s calendar is heavy with two central bank policy decision announcements on Thursday and US payroll report due Friday. The European Central Bank and Bank of England are widely expected to maintain interest rates unchanged at 4.00% and 5.75% respectively. We will focus on the central bank post-meeting statements for clues on future interest rate hike schedule. Both of the two banks are anticipated to raise rates at least one more time in the second half of the year.
After the huge decline in last week, the Standard & Poor’s 500 index today surged 1.15% to 1475.70. The Dow Jones industrial average roses more than 100 points. The rebound in equities reduced risk aversion towards risky investments. As a result, the safe haven currency, the US dollar, lost its lust and fell slightly.
This week’s calendar is heavy with two central bank policy decision announcements on Thursday and US payroll report due Friday. The European Central Bank and Bank of England are widely expected to maintain interest rates unchanged at 4.00% and 5.75% respectively. We will focus on the central bank post-meeting statements for clues on future interest rate hike schedule. Both of the two banks are anticipated to raise rates at least one more time in the second half of the year.
FX Awaits Barrage of Data
At 1:00 AM Japan June Housing Starts y/y (exp –3.2%, prev –10.7%)
At 2:00 AM Germany June Retail Sales m/m (exp 1.0%, prev –1.8%)
Germany June Retail Sales y/y (exp –1.7%, prev –3.7%)
At 4:00 AM Germany July Unemployment Rate (exp 9.0%, prev 9.1%)
At 5:00 AM Eurozone July Business Climate (exp 1.46, prev 1.54)
Eurozone July HICP flash y/y (exp 1.9%, prev 1.9%)
Eurozone June Unemployment Rate (exp 7.0%, prev 7.0%)
At 5:30 AM UK July GfK Survey (exp –4.0, prev –3.0)
At 8:30 AM US June core PCE m/m (exp 0.2%, prev 0.1%)
US June core PCE y/y (exp n/f, prev 1.9%)
US June PCE index m/m (exp n/f, prev 0.5%)
US June PCE index y/y (exp n/f, prev 2.3%)
US June Consumption (exp 0.2%, prev 0.5%)
US June Personal Income (exp 0.5%, prev 0.4%)
US Q2 Employment Cost Index (exp 0.9%, prev 0.8%)
Canada May GDP m/m (exp 0.4%, prev 0.3%)
At 9:45 AM US July Chicago PMI (exp 58.0, prev 60.2)
At 10:00 AM US July Consumer Confidence (exp 105.0, prev 103.9)
The dollar continued to give back gains in early Tuesday trading, slipping through 1.37 against the euro and falling beneath 2.03 versus the sterling. The coming session will see a barrage of economic reports for traders to assess the strength of the economies in the Eurozone, US and Canada. The greenback’s rebound from last week may be coming to an end, as traders are poised to resume the currency’s downtrend against the majors.
US economic reports due out include the Fed’s preferred gauge of inflation, the PCE index, June consumption, personal income, Q2 employment cost index, July Chicago PMI and July consumer confidence. The monthly core PCE figure is seen edging up slightly to 0.2% from 0.1%. Consumption for June is forecasted to slip to 0.2%, down from 0.5%, while personal income is expected to edge up slightly to 0.5% versus 0.4%. The Chicago PMI report is seen falling to 58.0, down from June at 60.2. Meanwhile, the Conference Board’s index of consumer confidence is expected to improve to 105.0, down from 103.9.
At 2:00 AM Germany June Retail Sales m/m (exp 1.0%, prev –1.8%)
Germany June Retail Sales y/y (exp –1.7%, prev –3.7%)
At 4:00 AM Germany July Unemployment Rate (exp 9.0%, prev 9.1%)
At 5:00 AM Eurozone July Business Climate (exp 1.46, prev 1.54)
Eurozone July HICP flash y/y (exp 1.9%, prev 1.9%)
Eurozone June Unemployment Rate (exp 7.0%, prev 7.0%)
At 5:30 AM UK July GfK Survey (exp –4.0, prev –3.0)
At 8:30 AM US June core PCE m/m (exp 0.2%, prev 0.1%)
US June core PCE y/y (exp n/f, prev 1.9%)
US June PCE index m/m (exp n/f, prev 0.5%)
US June PCE index y/y (exp n/f, prev 2.3%)
US June Consumption (exp 0.2%, prev 0.5%)
US June Personal Income (exp 0.5%, prev 0.4%)
US Q2 Employment Cost Index (exp 0.9%, prev 0.8%)
Canada May GDP m/m (exp 0.4%, prev 0.3%)
At 9:45 AM US July Chicago PMI (exp 58.0, prev 60.2)
At 10:00 AM US July Consumer Confidence (exp 105.0, prev 103.9)
The dollar continued to give back gains in early Tuesday trading, slipping through 1.37 against the euro and falling beneath 2.03 versus the sterling. The coming session will see a barrage of economic reports for traders to assess the strength of the economies in the Eurozone, US and Canada. The greenback’s rebound from last week may be coming to an end, as traders are poised to resume the currency’s downtrend against the majors.
US economic reports due out include the Fed’s preferred gauge of inflation, the PCE index, June consumption, personal income, Q2 employment cost index, July Chicago PMI and July consumer confidence. The monthly core PCE figure is seen edging up slightly to 0.2% from 0.1%. Consumption for June is forecasted to slip to 0.2%, down from 0.5%, while personal income is expected to edge up slightly to 0.5% versus 0.4%. The Chicago PMI report is seen falling to 58.0, down from June at 60.2. Meanwhile, the Conference Board’s index of consumer confidence is expected to improve to 105.0, down from 103.9.
FX Follows Stock Market
The dollar moves in the opposite direction with global stock market since last week as the extent of investors risk aversion directs the flow of money.
The dollar weakened against the euro and sterling in early Tuesday when rising Asia and European equities eased concern over credit market. However, US stocks dipped near the closing bell today, raising the attractiveness of safe heaven, the US dollar. The euro is trading in narrow range between 1.3680 and 1.3726 against the dollar on Tuesday. The sterling climbed more than 100 pips to as high as 2.0377 versus the dollar, catching up yesterday¡¯s lag with the euro strength.
The dollar was little changed after a run of mixed US data this morning as there is some caution after last week¡¯s huge correction in the dollar. US PCE index rose 0.1% in June, compared with a 0.5% reading in the prior month. Core PCE index came out at 0.1%, below the estimate of 0.2%. US personal income maintained a growth rate of 0.4% in June, falling short of a call for 0.5%. US personal spending only rose by 0.1% in June, far below the forecast of 0.2% and a previous reading of 0.5%. Besides, Chicago PMI fell from 60.2 to 53.4 in July, worse than the expectation of 58. US consumer confidence index increased from 103.9 to 112.6, beating the consensus of 105.
The dollar weakened against the euro and sterling in early Tuesday when rising Asia and European equities eased concern over credit market. However, US stocks dipped near the closing bell today, raising the attractiveness of safe heaven, the US dollar. The euro is trading in narrow range between 1.3680 and 1.3726 against the dollar on Tuesday. The sterling climbed more than 100 pips to as high as 2.0377 versus the dollar, catching up yesterday¡¯s lag with the euro strength.
The dollar was little changed after a run of mixed US data this morning as there is some caution after last week¡¯s huge correction in the dollar. US PCE index rose 0.1% in June, compared with a 0.5% reading in the prior month. Core PCE index came out at 0.1%, below the estimate of 0.2%. US personal income maintained a growth rate of 0.4% in June, falling short of a call for 0.5%. US personal spending only rose by 0.1% in June, far below the forecast of 0.2% and a previous reading of 0.5%. Besides, Chicago PMI fell from 60.2 to 53.4 in July, worse than the expectation of 58. US consumer confidence index increased from 103.9 to 112.6, beating the consensus of 105.
Dollar Steadies after Robust GDP
The dollar rallied broadly as investors cut risk exposures in global equity market and convert assets to safe haven, the US dollar.
The Dow Jones Industrial Average yesterday posted the biggest decline in five months. The S&P 500 market share shrank 30 billion yesterday. Japan and European stock markets also suffered losses in the global equity sell-off. Besides, credit spread between junk bonds and risk-free US treasury bonds widened.
The euro fell to test the long-term support at 1.3630 versus the dollar, while sterling slumped rapidly from 2.05 to as low as 2.0250.
The Dow Jones Industrial Average yesterday posted the biggest decline in five months. The S&P 500 market share shrank 30 billion yesterday. Japan and European stock markets also suffered losses in the global equity sell-off. Besides, credit spread between junk bonds and risk-free US treasury bonds widened.
The euro fell to test the long-term support at 1.3630 versus the dollar, while sterling slumped rapidly from 2.05 to as low as 2.0250.
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