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.
Tuesday, July 31, 2007
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.
Dollar Eased as Stocks Rebounded
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.
Sunday, July 29, 2007
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.
Friday, July 27, 2007
USD Edges Higher Ahead of GDP
At 8:30 AM US Q2 GDP y/y (exp 3.2%, prev 0.7%)
US Q2 PCE y/y (exp 3.6%, prev 3.5%)
US Q2 core PCE (exp 2.0%, prev 2.4%)
At 10:00 AM US July University of Michigan Sentiment Survey (exp 91.2, prev 85.3)
The greenback remains buoyed in early Friday trading, holding onto its previous session’s gains against the euro and sterling. The yen also continues to trade near its highs against the majors following the steep sell-off in the global equity bourses from the previous session, as heightened risk aversion remains a prime catalyst in carry trade unwinding. Lingering fears of a credit crunch and its detrimental impact on global financial markets have prompted investors to dump equities in favor of US Treasuries.
The economic calendar is poised to provide further support for the greenback, with markets looking ahead to second quarter GDP and the July University of Michigan sentiment survey. US growth in Q2 is forecasted to post a robust 3.2% gain, up sharply from a paltry first quarter reading of 0.7%. An upbeat GDP figure bodes well for the dollar and reinforces the case for the FOMC to remain unchanged over the remainder of this year, instead focusing on inflationary pressure. Accordingly, the Fed’s preferred inflation-measure, the PCE, is seen edging up in Q2 to 3.6% from a year earlier at 3.5%. The core PCE reading, however, is estimated to slip to 2.0%, down from 2.4%. Meanwhile, consumer sentiment is seen firming in July as the University of Michigan sentiment survey is forecasted to creep higher to 91.2 versus 85.3 from a month earlier. Overall, we expect the greenback to maintain its upbeat tone throughout the session, supported by data revealing improving US fundamentals.
US Q2 PCE y/y (exp 3.6%, prev 3.5%)
US Q2 core PCE (exp 2.0%, prev 2.4%)
At 10:00 AM US July University of Michigan Sentiment Survey (exp 91.2, prev 85.3)
The greenback remains buoyed in early Friday trading, holding onto its previous session’s gains against the euro and sterling. The yen also continues to trade near its highs against the majors following the steep sell-off in the global equity bourses from the previous session, as heightened risk aversion remains a prime catalyst in carry trade unwinding. Lingering fears of a credit crunch and its detrimental impact on global financial markets have prompted investors to dump equities in favor of US Treasuries.
The economic calendar is poised to provide further support for the greenback, with markets looking ahead to second quarter GDP and the July University of Michigan sentiment survey. US growth in Q2 is forecasted to post a robust 3.2% gain, up sharply from a paltry first quarter reading of 0.7%. An upbeat GDP figure bodes well for the dollar and reinforces the case for the FOMC to remain unchanged over the remainder of this year, instead focusing on inflationary pressure. Accordingly, the Fed’s preferred inflation-measure, the PCE, is seen edging up in Q2 to 3.6% from a year earlier at 3.5%. The core PCE reading, however, is estimated to slip to 2.0%, down from 2.4%. Meanwhile, consumer sentiment is seen firming in July as the University of Michigan sentiment survey is forecasted to creep higher to 91.2 versus 85.3 from a month earlier. Overall, we expect the greenback to maintain its upbeat tone throughout the session, supported by data revealing improving US fundamentals.
Yen Surges on Risk Aversion
The Japanese yen surges across the board on Thursday as investors exit carry trades on rising risk aversion. The subprime housing woes spread into stock and bond market today. Credit spread between emerging market bonds and US Treasury notes widened to a 13-month peak. The Dow Jones industrial average posted its biggest daily loss in five months.
After the dollar fell below the 200-day moving average at 119.70 versus the yen, the decline accelerated to reach 118.52. The sterling fell five big figures to as low as 242.85 against the yen. The euro dropped from 165.50 to around 163 versus the yen.
Comments from Japan officials earlier today also gave the yen a boost. The Bank of Japan board member Tadao Noda said the central bank is aware of the risks of a weak currency. The Finance Ministry’s top official, Hiroki Tsuda, said currencies should reflect economic fundamentals and that he is watching the currency market carefully.
After the dollar fell below the 200-day moving average at 119.70 versus the yen, the decline accelerated to reach 118.52. The sterling fell five big figures to as low as 242.85 against the yen. The euro dropped from 165.50 to around 163 versus the yen.
Comments from Japan officials earlier today also gave the yen a boost. The Bank of Japan board member Tadao Noda said the central bank is aware of the risks of a weak currency. The Finance Ministry’s top official, Hiroki Tsuda, said currencies should reflect economic fundamentals and that he is watching the currency market carefully.
Thursday, July 26, 2007
USD Buoyed Ahead of Data
At 2:00 AM UK July Nationwide House Prices (exp 10.6%, prev 11.1%)
At 4:00 AM Eurozone June M3 Money Supply (exp 10.7%, prev 10.7%)
Germany July Ifo Expectations (exp 102.0, prev 102.8)
Germany July Ifo Current Conditions (exp 111.0, prev 111.4)
At 8:30 AM US June New Home Sales (exp 895k units, prev 915k units)
US Weekly Jobless Claims (exp 310.0k, prev 301.0k)
US June Durable Goods Orders (exp 1.8%, prev –2.4%)
The dollar remains firm against the majors, holding onto yesterday’s gains as traders posture for strong US economic data over the next few sessions. The trade-weighted dollar index managed to bounce off the key 80-level, finding reprieve from aggressive selling over recent weeks. The greenback’s recovery was in large part due to unwinding in the carry trades, dragging the euro and sterling lower across the board.
In the coming session, markets will digest US weekly jobless claims, June new home sales, and durable goods orders. Weekly jobless claims are seen edging up slightly to 310k, from 301k a week earlier. Although the dollar was resilient to yesterday’s disappointing existing home sales, which tumbled to its lowest level since 2002 – it reminds traders of the precarious state of the US economy. Attention will shift to today’s new home sales that are expected to decline to 895k units in June versus 915k units a month earlier. Meanwhile, boding well for the greenback are forecasts for a sharp reversal in June durable goods orders from May’s 2.4% decline, jumping by 1.8%.
At 4:00 AM Eurozone June M3 Money Supply (exp 10.7%, prev 10.7%)
Germany July Ifo Expectations (exp 102.0, prev 102.8)
Germany July Ifo Current Conditions (exp 111.0, prev 111.4)
At 8:30 AM US June New Home Sales (exp 895k units, prev 915k units)
US Weekly Jobless Claims (exp 310.0k, prev 301.0k)
US June Durable Goods Orders (exp 1.8%, prev –2.4%)
The dollar remains firm against the majors, holding onto yesterday’s gains as traders posture for strong US economic data over the next few sessions. The trade-weighted dollar index managed to bounce off the key 80-level, finding reprieve from aggressive selling over recent weeks. The greenback’s recovery was in large part due to unwinding in the carry trades, dragging the euro and sterling lower across the board.
In the coming session, markets will digest US weekly jobless claims, June new home sales, and durable goods orders. Weekly jobless claims are seen edging up slightly to 310k, from 301k a week earlier. Although the dollar was resilient to yesterday’s disappointing existing home sales, which tumbled to its lowest level since 2002 – it reminds traders of the precarious state of the US economy. Attention will shift to today’s new home sales that are expected to decline to 895k units in June versus 915k units a month earlier. Meanwhile, boding well for the greenback are forecasts for a sharp reversal in June durable goods orders from May’s 2.4% decline, jumping by 1.8%.
Dollar Rose Across the Board
The dollar rallied sharply across the board, recovering after recent rapid decline. After breaking the 1.38 handle, the euro accelerated its decline versus the dollar, heading towards next key level at 1.37. The sterling fell off the 26-year high set yesterday to as low as 2.0488 against the dollar.
The dollar correction is due partly to technical factors and partly to temporary passing of subprime fears. However, it should be noted that US housing issues are still existing and will nudge the market once a while in future.
US existing home sales dropped 3.8% in June to an annual rate of 5.75 million units, below the estimate of 5.87 million. The market will look into the new home sales report due tomorrow for more clues on housing market. New home sales are expected to fall from 915k units to 895k in June. Other economic data to be released on Thursday include Germany IFO survey for July, US weekly jobless claims, US durable goods orders, and Japan CPI and retail sales reports.
The dollar correction is due partly to technical factors and partly to temporary passing of subprime fears. However, it should be noted that US housing issues are still existing and will nudge the market once a while in future.
US existing home sales dropped 3.8% in June to an annual rate of 5.75 million units, below the estimate of 5.87 million. The market will look into the new home sales report due tomorrow for more clues on housing market. New home sales are expected to fall from 915k units to 895k in June. Other economic data to be released on Thursday include Germany IFO survey for July, US weekly jobless claims, US durable goods orders, and Japan CPI and retail sales reports.
Wednesday, July 25, 2007
JPY Strength Dictates FX
At 10:00 AM US June Existing Home Sales (exp –1.8%, prev –0.3%)
US June Existing Home Sales (exp 5.87 mln units, prev 5.99 mln units)
The yen strengthened across the board in early Tokyo trading, pushing through the 120-level against the dollar and climbing to 246.34 versus the sterling. Meanwhile, the greenback rode the coattails of yen strength and recovered toward the 1.38-mark versus the euro. Traders will analyze US existing home sales to further assess housing market activity, with home sales forecasted to fall by 1.8% to 5.87 million units in June.
US June Existing Home Sales (exp 5.87 mln units, prev 5.99 mln units)
The yen strengthened across the board in early Tokyo trading, pushing through the 120-level against the dollar and climbing to 246.34 versus the sterling. Meanwhile, the greenback rode the coattails of yen strength and recovered toward the 1.38-mark versus the euro. Traders will analyze US existing home sales to further assess housing market activity, with home sales forecasted to fall by 1.8% to 5.87 million units in June.
Greenback Fell on Housing Fears
The greenback fell across the board as US housing concerns remains a big problem and it may spread into the broader economy. The euro touched the 1.3850 resistance level versus the dollar before easing back to around 1.3820. The sterling climbed to a fresh 26-year high at 2.0652 against the dollar and then retraced back to 2.0610.
The dollar index fell to a 15-year low of 80.016, near the psychological support at 80. A break of this level may trigger another round of sharp dollar sell-off.
Several manufacturing reports from the Eurozone were mixed and did little to the market. The market will focus on US June existing home sales due 10AM EST tomorrow for more clues on the nation’s housing market conditions. The report is expected to show a –1.8% decline to an annual rate of 5.87 million units, which may weigh on the dollar.
The dollar index fell to a 15-year low of 80.016, near the psychological support at 80. A break of this level may trigger another round of sharp dollar sell-off.
Several manufacturing reports from the Eurozone were mixed and did little to the market. The market will focus on US June existing home sales due 10AM EST tomorrow for more clues on the nation’s housing market conditions. The report is expected to show a –1.8% decline to an annual rate of 5.87 million units, which may weigh on the dollar.
Dollar Struggles, Mired Near Lows
At 4:00 AM May Eurozone Current Account Balance (exp –1.2 bln euros, prev –4.0 bln euros)
July Eurozone Service PMI (exp 58.0, prev 58.3)
July Eurozone Manufacturing PMI (exp 55.5, prev 55.6)
At 5:00 AM May Eurozone Industrial Orders m/m (exp 1.1%, prev –0.4%)
May Eurozone Industrial Orders y/y (exp 7.8%, prev 12.2%)
At 8:30 AM Canada May Retail Sales m/m (exp 0.5%, prev 0.4%)
Canada May Retail Sales ex-autos m/m (exp 0.6%, prev 0.0%)
At 10:00 AM US July Richmond Fed Survey (exp 5, prev 4)
The beleaguered dollar found no reprieve in the early Tokyo session, dropping to fresh 18-year lows versus the Aussie at 0.8847 and falling to a new 26-year low against the sterling at 2.0640. We continue to monitor the trade-weighted dollar index, which trades just above the key 80-level. Traders will closely assess this week’s US economic reports to discern the trend for the greenback over the coming months – with overwhelming sentiment biased toward further declines as a result of expectations for global interest rate differentials.
The economic calendar from the US for Tuesday is light, consisting of only the July Richmond Fed manufacturing survey – seen improving to 5, up from 4 in the previous month. Traders will also continue to analyze earnings releases and monitor US equity performance. There are also Fed officials scheduled to speak, including Mishkin and Poole.
July Eurozone Service PMI (exp 58.0, prev 58.3)
July Eurozone Manufacturing PMI (exp 55.5, prev 55.6)
At 5:00 AM May Eurozone Industrial Orders m/m (exp 1.1%, prev –0.4%)
May Eurozone Industrial Orders y/y (exp 7.8%, prev 12.2%)
At 8:30 AM Canada May Retail Sales m/m (exp 0.5%, prev 0.4%)
Canada May Retail Sales ex-autos m/m (exp 0.6%, prev 0.0%)
At 10:00 AM US July Richmond Fed Survey (exp 5, prev 4)
The beleaguered dollar found no reprieve in the early Tokyo session, dropping to fresh 18-year lows versus the Aussie at 0.8847 and falling to a new 26-year low against the sterling at 2.0640. We continue to monitor the trade-weighted dollar index, which trades just above the key 80-level. Traders will closely assess this week’s US economic reports to discern the trend for the greenback over the coming months – with overwhelming sentiment biased toward further declines as a result of expectations for global interest rate differentials.
The economic calendar from the US for Tuesday is light, consisting of only the July Richmond Fed manufacturing survey – seen improving to 5, up from 4 in the previous month. Traders will also continue to analyze earnings releases and monitor US equity performance. There are also Fed officials scheduled to speak, including Mishkin and Poole.
Tuesday, July 24, 2007
Dollar Rebounded vs Euro
The dollar rebounded against the euro slightly as a corrective move following recent sharp decline. The euro fell from 1.3850 to test 1.38 handle versus the dollar. With no economic data release, most major currencies trade in narrow ranges. Should the euro break 1.38, the dollar correction may extend to 1.37 before further euro rally to 1.39.
The sterling climbed to a fresh 26-year high at 2.0602 versus the dollar on expectations that the Bank of England will raise interest rates at least one more time in the second half of this year.
Commodity currencies gained as copper surged and oil prices hovered at high level. The Australian dollar rose to as high as 0.8842 versus the dollar, while the Canadian dollar stood firm below the 1.05 level against the dollar.
The sterling climbed to a fresh 26-year high at 2.0602 versus the dollar on expectations that the Bank of England will raise interest rates at least one more time in the second half of this year.
Commodity currencies gained as copper surged and oil prices hovered at high level. The Australian dollar rose to as high as 0.8842 versus the dollar, while the Canadian dollar stood firm below the 1.05 level against the dollar.
JPY Climbs Higher
The greenback kicks off trading mired near its lows as traders posture for several key US economic reports due out this week. Given the increased scrutiny over recent data for spillover effects from the subprime meltdown, traders will carefully analyze housing reports, Q2 GDP, PCE, and the University of Michigan consumer sentiment survey. US growth in the second quarter is seen rebounding sharply from a lackluster Q1, with the preliminary figure set to reveal robust 3.2% GDP versus a measly 0.7% from the previous quarter.
Sentiment over global interest rate differentials will continue to be a key driver in FX movements. In light of last week’s Congressional testimony from Fed Chairman Bernanke, the FOMC remains poised to leave policy unchanged with a bias against inflation. Nevertheless, with the BoE and ECB both set to maintain its tightening stance – we anticipate further losses in the dollar in the coming months as a result of yield disparities.
Sentiment over global interest rate differentials will continue to be a key driver in FX movements. In light of last week’s Congressional testimony from Fed Chairman Bernanke, the FOMC remains poised to leave policy unchanged with a bias against inflation. Nevertheless, with the BoE and ECB both set to maintain its tightening stance – we anticipate further losses in the dollar in the coming months as a result of yield disparities.
Saturday, July 21, 2007
Dollar Slid Across the Board
The dollar slid across the board during the US morning session in a technical move. After the sterling broke 2.0550 against the dollar, the rally accelerated to reach as high as 2.0585. The euro rose to a fresh all-time high at 1.3842 versus the dollar.
The sterling rebounded following a stronger-than-expected UK second quarter GDP report, bolstering odds that the Bank of England may raise rates once more this year. UK economy grew by 0.8% on a quarter on quarter basis, beating the estimate of 0.7% and faster than a 0.7% growth rate in the previous quarter.
As housing issues remain the major concern especially after Fed Chairman Bernanke’s testimony, the overall sentiment over the greenback is still bearish.
GBPUSD encounters interim resistance at 2.0580, backed by 2.0600 and 2.0630. Subsequent ceilings will emerge at 2.0650, followed by 2.0680 and 2.0700. On the downside, support begins at 2.0520, followed by 2.0500 and 2.0480. Additional floors are eyed at 2.0450, backed by 2.0420 and 2.0400.
The sterling rebounded following a stronger-than-expected UK second quarter GDP report, bolstering odds that the Bank of England may raise rates once more this year. UK economy grew by 0.8% on a quarter on quarter basis, beating the estimate of 0.7% and faster than a 0.7% growth rate in the previous quarter.
As housing issues remain the major concern especially after Fed Chairman Bernanke’s testimony, the overall sentiment over the greenback is still bearish.
GBPUSD encounters interim resistance at 2.0580, backed by 2.0600 and 2.0630. Subsequent ceilings will emerge at 2.0650, followed by 2.0680 and 2.0700. On the downside, support begins at 2.0520, followed by 2.0500 and 2.0480. Additional floors are eyed at 2.0450, backed by 2.0420 and 2.0400.
Friday, July 20, 2007
Sterling Fell on Tame Retail Sales
The sterling following a weaker-than-expected UK retail sales report, dampening expectations for one more rate hike by the Bank of England within this year. The currency fell off a fresh 26-year high at 2.0546 against the dollar set yesterday to below 2.05 level. UK retail sales fell from 0.4% to 0.2% in June, falling short of a call for a 0.3% growth. The year on year retail sales growth rate was down from 3.9% to 3.4%.
The dollar remained under pressure after Fed Chairman Ben Bernanke stated the negative impact of housing issues may get worse and last longer than expected in the testimony yesterday. He today said yen weakness largely reflects Japan low interest rates. He added that he does not advocate any policy change by the Bank of Japan. Carry trades will continue to be favored as the BOJ keep its interest rates at the lowest level among all industrial countries.
Like yesterday, the dollar was little impacted by any single economic data. US weekly jobless claims fell 7k to 301k, slightly better than the estimate of 311k. US leading indicators unexpectedly rose 0.3%, versus a forecast of 0.0%. Philadelphia Fed business activity index came out at 9.2, below the estimate of 13.3.
The dollar remained under pressure after Fed Chairman Ben Bernanke stated the negative impact of housing issues may get worse and last longer than expected in the testimony yesterday. He today said yen weakness largely reflects Japan low interest rates. He added that he does not advocate any policy change by the Bank of Japan. Carry trades will continue to be favored as the BOJ keep its interest rates at the lowest level among all industrial countries.
Like yesterday, the dollar was little impacted by any single economic data. US weekly jobless claims fell 7k to 301k, slightly better than the estimate of 311k. US leading indicators unexpectedly rose 0.3%, versus a forecast of 0.0%. Philadelphia Fed business activity index came out at 9.2, below the estimate of 13.3.
Thursday, July 19, 2007
Greenback Consolidates Near Lows
At 2:00 AM June Germany PPI m/m (exp 0.2%, prev 0.3%)
June Germany PPI y/y (exp 1.8%, prev 1.9%)
At 4:30 AM UK June Retail Sales m/m (exp 0.3%, prev 0.4%)
UK June Retail Sales y/y (exp 3.5%, prev 3.9%)
At 8:30 AM Canada May Wholesale Trade m/m (exp 0.5%, prev –3.1%)
US Weekly Jobless Claims (exp 311k, prev 308k)
At 9:00 AM US June Leading Indicators (exp 0.0%, prev 0.3%)
At 12:00 PMUS July Philadelphia Fed Survey (exp 13.3, prev 18.0)
The dollar is little changed in early Thursday trading as it continues to struggle near its lows against the euro and sterling. Yesterday’s US CPI report and Congressional testimony from Fed Chairman Bernanke garnered a muted response in the currency market – as it seems clear the FOMC is at a stalemate with lingering inflationary pressure and moderating growth. As mentioned in yesterday’s preview, the trade-weighted dollar index now rests on a key multi-year support level – which could prompt some consolidation but likely prove insufficient in holding back the dollar bears.
US economic data set for release include June leading indicators and the July Philadelphia Fed survey, which are both expected to reaffirm slowing conditions in the economy. The June leading indicators are seen flat, down from 0.3% in May. Meanwhile, the July Philadelphia Fed Survey is expected to fall to 13.3 down from 18.0 from June. Also on the schedule will be Chairman Bernanke’s testimony before the Senate Banking Committee, in which he will likely reiterate yesterday’s comments.
June Germany PPI y/y (exp 1.8%, prev 1.9%)
At 4:30 AM UK June Retail Sales m/m (exp 0.3%, prev 0.4%)
UK June Retail Sales y/y (exp 3.5%, prev 3.9%)
At 8:30 AM Canada May Wholesale Trade m/m (exp 0.5%, prev –3.1%)
US Weekly Jobless Claims (exp 311k, prev 308k)
At 9:00 AM US June Leading Indicators (exp 0.0%, prev 0.3%)
At 12:00 PMUS July Philadelphia Fed Survey (exp 13.3, prev 18.0)
The dollar is little changed in early Thursday trading as it continues to struggle near its lows against the euro and sterling. Yesterday’s US CPI report and Congressional testimony from Fed Chairman Bernanke garnered a muted response in the currency market – as it seems clear the FOMC is at a stalemate with lingering inflationary pressure and moderating growth. As mentioned in yesterday’s preview, the trade-weighted dollar index now rests on a key multi-year support level – which could prompt some consolidation but likely prove insufficient in holding back the dollar bears.
US economic data set for release include June leading indicators and the July Philadelphia Fed survey, which are both expected to reaffirm slowing conditions in the economy. The June leading indicators are seen flat, down from 0.3% in May. Meanwhile, the July Philadelphia Fed Survey is expected to fall to 13.3 down from 18.0 from June. Also on the schedule will be Chairman Bernanke’s testimony before the Senate Banking Committee, in which he will likely reiterate yesterday’s comments.
Dollar Dipped on Bernanke Testimony
The dollar fell modestly across the board as the Fed Chairman Ben Bernanke addressed ongoing housing problem in congressional testimony. The euro rose from around 1.3775 against the dollar to above 1.38 handle, while the sterling bounced back to near 2.0550.
Bernanke said housing will remain a drag on economic growth over coming quarters. The Fed expected housing foreclosures may get worse before improving. His comments increased market worries over the collapse of subprime mortgage sector and pushed the dollar lower.
With regard to inflation, Bernanke said the Fed is still very much concerned. He said recent inflation is clearly too high but core inflation should ease as commodity prices flatten. He added it is more difficult to maintain price stability if inflation expectations rise. The Fed is more likely to keep interest rates unchanged instead of cutting rates this year.
Bernanke said housing will remain a drag on economic growth over coming quarters. The Fed expected housing foreclosures may get worse before improving. His comments increased market worries over the collapse of subprime mortgage sector and pushed the dollar lower.
With regard to inflation, Bernanke said the Fed is still very much concerned. He said recent inflation is clearly too high but core inflation should ease as commodity prices flatten. He added it is more difficult to maintain price stability if inflation expectations rise. The Fed is more likely to keep interest rates unchanged instead of cutting rates this year.
USD Slumps Ahead of CPI, Bernanke
At 1:00 AM Japan May Leading Index (exp n/f, prev 30.0)
At 4:30 AM UK May ILO Unemployment Rate (exp 5.5%, prev 5.5%)
UK May Claimant Count (exp –8.0k, prev –9.3k)
UK May Avg Earnings 3-mth (exp 3.6%, prev 4.0%)
UK July MPC Meeting Minutes (exp 6-3, prev 4-5)
At 5:00 AM Eurozone May Foreign Trade (exp 2.1 bln euros, prev 1.8 bln euros)
At 7:00 AM Canada June CPI m/m (exp 0.1%, prev 0.4%)
Canada June CPI y/y (exp 2.4%, prev 2.2%)
Canada June core CPI m/m (exp 0.1%, prev 0.3%)
Canada June core CPI y/y (exp 2.6%, prev 2.2%)
At 8:30 AM Canada June Leading Indicator (exp 0.4%, prev 0.5%)
US June CPI m/m (exp 0.1%, prev 0.7%)
US June CPI y/y (exp 2.6%, prev 2.7%)
US June core CPI m/m (exp 0.2%, prev 0.1%)
US June core CPI y/y (exp 2.2%, prev 2.2%)
US June Housing Starts (exp 1.45-mln units, prev 1.474-mln units)
US June Building Permits (exp 1.48-mln units, prev 1.52-mln units)
At 10:00 AM Fed Chairman Bernanke’s Congressional Testimony
The greenback continued to slide in early Asian trading, falling to a fresh all-time low against the euro at 1.3822 and a new 26-year low versus the sterling just shy of the 2.05-level. It’s worth noting that the trade-weighted dollar index is resting on a key support region not seen since 1992 around the 80.40-mark. A breach of this level could open up the floodgates for further losses in the currency, potentially paving the way for a move in the euro toward the 1.40-level.
Market attention will shift to Wednesday’s all-important US inflation data and Fed Chairman Ben Bernanke’s testimony before Congress. The FOMC has maintained its unchanged stance citing that the balance of risks remains skewed toward inflation despite deteriorating fundamentals in the US economy. While there is little doubt the woes in the housing market have remained on the backburner for the Fed, the extent of the downturn has been inconsistent with the jobs market remaining firm and inflationary pressure lingering – thereby keeping its hand in check. We expect the FOMC will ease rates by 25-basis points by December, on a combination of further declines in economic activity and easing of inflation.
At 4:30 AM UK May ILO Unemployment Rate (exp 5.5%, prev 5.5%)
UK May Claimant Count (exp –8.0k, prev –9.3k)
UK May Avg Earnings 3-mth (exp 3.6%, prev 4.0%)
UK July MPC Meeting Minutes (exp 6-3, prev 4-5)
At 5:00 AM Eurozone May Foreign Trade (exp 2.1 bln euros, prev 1.8 bln euros)
At 7:00 AM Canada June CPI m/m (exp 0.1%, prev 0.4%)
Canada June CPI y/y (exp 2.4%, prev 2.2%)
Canada June core CPI m/m (exp 0.1%, prev 0.3%)
Canada June core CPI y/y (exp 2.6%, prev 2.2%)
At 8:30 AM Canada June Leading Indicator (exp 0.4%, prev 0.5%)
US June CPI m/m (exp 0.1%, prev 0.7%)
US June CPI y/y (exp 2.6%, prev 2.7%)
US June core CPI m/m (exp 0.2%, prev 0.1%)
US June core CPI y/y (exp 2.2%, prev 2.2%)
US June Housing Starts (exp 1.45-mln units, prev 1.474-mln units)
US June Building Permits (exp 1.48-mln units, prev 1.52-mln units)
At 10:00 AM Fed Chairman Bernanke’s Congressional Testimony
The greenback continued to slide in early Asian trading, falling to a fresh all-time low against the euro at 1.3822 and a new 26-year low versus the sterling just shy of the 2.05-level. It’s worth noting that the trade-weighted dollar index is resting on a key support region not seen since 1992 around the 80.40-mark. A breach of this level could open up the floodgates for further losses in the currency, potentially paving the way for a move in the euro toward the 1.40-level.
Market attention will shift to Wednesday’s all-important US inflation data and Fed Chairman Ben Bernanke’s testimony before Congress. The FOMC has maintained its unchanged stance citing that the balance of risks remains skewed toward inflation despite deteriorating fundamentals in the US economy. While there is little doubt the woes in the housing market have remained on the backburner for the Fed, the extent of the downturn has been inconsistent with the jobs market remaining firm and inflationary pressure lingering – thereby keeping its hand in check. We expect the FOMC will ease rates by 25-basis points by December, on a combination of further declines in economic activity and easing of inflation.
Wednesday, July 18, 2007
Sterling Gained on CPI
The sterling jumped above 2.04 versus the dollar after a report showed inflation deceleration was not as fast as expected.
UK CPI headline for June fell from 2.5% to 2.4% as expected. Excluding volatile components, food and energy, the core index rose at a rate of 2% in the year to June, the fastest pace since March 1997. Another inflation gauge, RPI came out at 4.4%, up from a reading of 4.3% in the previous month. The Bank of England may need to lift rates once more in September to curb inflation.
The sterling rallied across the board following the inflation reports. It broke through the 2.04 handle against the dollar and rose to a fresh 26-year high at 2.0474.
UK CPI headline for June fell from 2.5% to 2.4% as expected. Excluding volatile components, food and energy, the core index rose at a rate of 2% in the year to June, the fastest pace since March 1997. Another inflation gauge, RPI came out at 4.4%, up from a reading of 4.3% in the previous month. The Bank of England may need to lift rates once more in September to curb inflation.
The sterling rallied across the board following the inflation reports. It broke through the 2.04 handle against the dollar and rose to a fresh 26-year high at 2.0474.
Dollar Extended Loss, Awaits PPI
The dollar extended loss against its major rivals as the market has not got rid of the scare that the subprime sector meltdown may spill over into the broader economy especially after last Friday’s surprisingly weak retail sales data. The euro hovers under 1.38 versus the dollar, while the sterling strengthened to test the 2.04 level for the first time in 26 years.
Though a report showed manufacturing activity quickened in New York State, the dollar remained under pressure as inflation and housing data to be released this week are expected to be weak. The Empire Fed manufacturing index for July rose from 25.75 to 26.46, beating the estimate of 18.
A bunch of economic reports from US are due tomorrow. PPI, a key inflation gauge, is expected to fall from 0.9% to 0.2% in June. Excluding food and energy, core index is estimated to remain at 0.2% unchanged. US net TICS is seen to decrease from 84.1 billion to 70.0 billion. Capacity utilization is forecasted to barely changed from prior month’s reading of 81.3%. Besides, industrial production may increase 0.4% in June.
Though a report showed manufacturing activity quickened in New York State, the dollar remained under pressure as inflation and housing data to be released this week are expected to be weak. The Empire Fed manufacturing index for July rose from 25.75 to 26.46, beating the estimate of 18.
A bunch of economic reports from US are due tomorrow. PPI, a key inflation gauge, is expected to fall from 0.9% to 0.2% in June. Excluding food and energy, core index is estimated to remain at 0.2% unchanged. US net TICS is seen to decrease from 84.1 billion to 70.0 billion. Capacity utilization is forecasted to barely changed from prior month’s reading of 81.3%. Besides, industrial production may increase 0.4% in June.
Data Barrage to Set Tone in FX
At 3:15 AM Swiss May Retail Sales (exp 4.8%, prev 3.2%)
At 4:30 AM UK June RPI m/m (exp 0.3%, prev 0.4%)
UK June RPI y/y (exp 4.2%, prev 4.3%)
UK June CPI m/m (exp 0.1%, prev 0.3%)
UK June CPI y/y (exp 2.4%, prev 2.5%)
At 5:00 AM Germany July ZEW current conditions (exp 88.0, prev 88.7)
Germany July ZEW economic sentiment (exp 19.0, prev 20.3)
At 8:30 AM US June PPI m/m (exp 0.2%, prev 0.9%)
US June PPI y/y (exp n/f, prev 4.1%)
US June core PPI m/m (exp 0.2%, prev 0.2%)
US June core PPI y/y (exp n/f, prev 1.6%)
At 9:00 AM US May Net TICS (exp $70.0 bln, prev $84.1 bln)
At 9:15 AM US June Capacity Utilization (exp 81.5%, prev 81.3%)
US June Industrial Production (exp 0.4%, prev 0.0%)
At 1:00 PM US July NAHB Housing Market Index (exp 27, prev 28)
A flurry of economic data slated for release in the Tuesday session will set the tone for the currency market and determine whether the dollar’s woes will continue. Already mired near record lows against the euro and 26-year lows versus the sterling, traders will analyze the inflation and manufacturing outlook for the US economy to gauge the likelihood for a Fed rate cut this year, which consequently, would likely prompt further declines for the greenback.
US reports set for release include June producer price index, May Net TICS, June industrial production, capacity utilization and the July NAHB housing market index. The combination of inflation, manufacturing and housing reports will provide greater insight into the health of the US economy – given fears that the slowdown in housing has continued to drag manufacturing lower while lingering inflation keeps the FOMC on hold. We anticipate headline PPI falling in July to 0.2% from 0.9%, while the core reading is unchanged at 0.2%. Industrial production for June is expected to improve to 0.4% from a flat reading in May and capacity utilization is forecasted to edge higher to 81.5% from 81.3%. The July NAHB housing market index is seen slipping to 27 from June at 28.
At 4:30 AM UK June RPI m/m (exp 0.3%, prev 0.4%)
UK June RPI y/y (exp 4.2%, prev 4.3%)
UK June CPI m/m (exp 0.1%, prev 0.3%)
UK June CPI y/y (exp 2.4%, prev 2.5%)
At 5:00 AM Germany July ZEW current conditions (exp 88.0, prev 88.7)
Germany July ZEW economic sentiment (exp 19.0, prev 20.3)
At 8:30 AM US June PPI m/m (exp 0.2%, prev 0.9%)
US June PPI y/y (exp n/f, prev 4.1%)
US June core PPI m/m (exp 0.2%, prev 0.2%)
US June core PPI y/y (exp n/f, prev 1.6%)
At 9:00 AM US May Net TICS (exp $70.0 bln, prev $84.1 bln)
At 9:15 AM US June Capacity Utilization (exp 81.5%, prev 81.3%)
US June Industrial Production (exp 0.4%, prev 0.0%)
At 1:00 PM US July NAHB Housing Market Index (exp 27, prev 28)
A flurry of economic data slated for release in the Tuesday session will set the tone for the currency market and determine whether the dollar’s woes will continue. Already mired near record lows against the euro and 26-year lows versus the sterling, traders will analyze the inflation and manufacturing outlook for the US economy to gauge the likelihood for a Fed rate cut this year, which consequently, would likely prompt further declines for the greenback.
US reports set for release include June producer price index, May Net TICS, June industrial production, capacity utilization and the July NAHB housing market index. The combination of inflation, manufacturing and housing reports will provide greater insight into the health of the US economy – given fears that the slowdown in housing has continued to drag manufacturing lower while lingering inflation keeps the FOMC on hold. We anticipate headline PPI falling in July to 0.2% from 0.9%, while the core reading is unchanged at 0.2%. Industrial production for June is expected to improve to 0.4% from a flat reading in May and capacity utilization is forecasted to edge higher to 81.5% from 81.3%. The July NAHB housing market index is seen slipping to 27 from June at 28.
Monday, July 16, 2007
USD Mired Near Lows
Japan’s Market Closed for Holiday
At 2:00 AM Germany June HICP m/m (exp 0.1%, prev 0.2%)
Germany June HICP y/y (exp 2.0%, prev 2.0%)
Germany June CPI m/m (exp 0.1%, prev 0.2%)
Germany June CPI y/y (exp 1.8%, prev 1.9%)
At 5:00 AM Eurozone CPI m/m (exp 0.1%, prev 0.2%)
Eurozone CPI y/y (exp 1.9%, prev 1.9%)
Eurozone CPI ex-F&E m/m (exp 0.1%, prev 0.2%)
Eurozone CPI ex-F&E y/y (exp 1.9%, prev 1.9%)
At 8:30 AM US July NY Fed Manufacturing Survey (exp 18.0, prev 25.75)
Canada May Manufacturing Shipments (exp 0.5%, prev –0.6%)
The dollar continued to struggle in a holiday-thinned Asian session, remaining mired near all-time lows against the euro shy of the 1.38-mark and 26-year lows versus the sterling. Lingering uncertainties stemming from the subprime mortgage market and potential spillover to the overall economy are the catalyst for the latest sell-off in the greenback. Although the FOMC has offered little hints of a possible shift to an easing stance, traders’ anticipation for a rate cut either later this year or in early 2008 has compounded the dollar’s woes.
At 2:00 AM Germany June HICP m/m (exp 0.1%, prev 0.2%)
Germany June HICP y/y (exp 2.0%, prev 2.0%)
Germany June CPI m/m (exp 0.1%, prev 0.2%)
Germany June CPI y/y (exp 1.8%, prev 1.9%)
At 5:00 AM Eurozone CPI m/m (exp 0.1%, prev 0.2%)
Eurozone CPI y/y (exp 1.9%, prev 1.9%)
Eurozone CPI ex-F&E m/m (exp 0.1%, prev 0.2%)
Eurozone CPI ex-F&E y/y (exp 1.9%, prev 1.9%)
At 8:30 AM US July NY Fed Manufacturing Survey (exp 18.0, prev 25.75)
Canada May Manufacturing Shipments (exp 0.5%, prev –0.6%)
The dollar continued to struggle in a holiday-thinned Asian session, remaining mired near all-time lows against the euro shy of the 1.38-mark and 26-year lows versus the sterling. Lingering uncertainties stemming from the subprime mortgage market and potential spillover to the overall economy are the catalyst for the latest sell-off in the greenback. Although the FOMC has offered little hints of a possible shift to an easing stance, traders’ anticipation for a rate cut either later this year or in early 2008 has compounded the dollar’s woes.
Saturday, July 14, 2007
Dollar 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%.
Friday, July 13, 2007
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.
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.
Wednesday, July 11, 2007
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.
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 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.
Tuesday, July 10, 2007
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.
CAD Extended Rally Before BOC
The dollar was flat in Monday quiet trading, and bearish sentiment over the dollar was partially dissipated after surprisingly strong US non-farm payrolls released last Friday. However, European currencies will still be favored compared with the greenback, since the Fed has stopped monetary policy tightening while other central banks keep on raising rates.
The Canadian dollar, the biggest winner across the board today, hit a fresh 30-year low at 1.0447 against the dollar. Bank of Canada is likely to increase its interest rates by a quarter percentage point to 4.50% tomorrow. The central bank did not make any move since it raised its key rates to 4.25% in May 2006.
Besides, recent data showed Canada labor market is in good shape and manufacturing expanded. Also commodity prices are moving in the Canadian dollar’s favor.
The Canadian dollar, the biggest winner across the board today, hit a fresh 30-year low at 1.0447 against the dollar. Bank of Canada is likely to increase its interest rates by a quarter percentage point to 4.50% tomorrow. The central bank did not make any move since it raised its key rates to 4.25% in May 2006.
Besides, recent data showed Canada labor market is in good shape and manufacturing expanded. Also commodity prices are moving in the Canadian dollar’s favor.
Monday, July 9, 2007
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.
Saturday, July 7, 2007
Dollar Fell after Post-Payrolls Rally
In early session, the dollar gained instantly after a report from the Labor Department showed the US economy added more jobs than expected in June. US non-farm payrolls came out at 132k, better than the forecast of 120k. Following the robust job report, the euro fell to 13570 versus the dollar, while the sterling slipped to as low as 2.0060.
However, the euro and sterling pared losses against the dollar later. The euro passed through the 1.36 handle again with a key resistance at 1.3660 ahead. The pair is likely to consolidate in the range between 1.3550 and 1.3650 before another round of upside move.
The sterling sustained above 2.0060 versus the dollar and closed above the 2.01 level on Friday. Should the currency does not break 2.0020 support level, it may strengthen further to test 2.02.
However, the euro and sterling pared losses against the dollar later. The euro passed through the 1.36 handle again with a key resistance at 1.3660 ahead. The pair is likely to consolidate in the range between 1.3550 and 1.3650 before another round of upside move.
The sterling sustained above 2.0060 versus the dollar and closed above the 2.01 level on Friday. Should the currency does not break 2.0020 support level, it may strengthen further to test 2.02.
Friday, July 6, 2007
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 Rebounded on Robust ISM
The greenback rebounded against its major rivals following the stronger-than-expected non-manufacturing ISM index. The index rose from 59.7 to 60.7 in June, beating the estimate of 58. The euro dipped below 1.36 handle versus the dollar, while the yen weakened to reach 123.00 against the dollar.
Earlier, US ADP report showed the economy added 150k jobs in private sector in June, far more than the forecast of 100k and a reading of 97k in the prior month. The weekly jobless claims came out at 318k, slightly higher than the forecast of 313k. The market will focus on the non-farm payrolls for June to be released by the Labor Department tomorrow morning for more clues on the nation’s labor market.
The European Central Bank kept interest rates unchanged at 4.00% as expected. ECB Governor Trichet did not use the word “vigilance” to describe the bank’s attitude towards inflation control, pushing the euro lower modestly. It is already a done deal that the ECB will raise rates at least once on its October policy meeting.
Earlier, US ADP report showed the economy added 150k jobs in private sector in June, far more than the forecast of 100k and a reading of 97k in the prior month. The weekly jobless claims came out at 318k, slightly higher than the forecast of 313k. The market will focus on the non-farm payrolls for June to be released by the Labor Department tomorrow morning for more clues on the nation’s labor market.
The European Central Bank kept interest rates unchanged at 4.00% as expected. ECB Governor Trichet did not use the word “vigilance” to describe the bank’s attitude towards inflation control, pushing the euro lower modestly. It is already a done deal that the ECB will raise rates at least once on its October policy meeting.
Thursday, July 5, 2007
FX 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%.
Wednesday, July 4, 2007
Pound Extended Gains, Eyes on BOE & ECB
Major currency pairs trade in narrow ranges today due to US Independence Day.
The British pound extended its gains versus the dollar on speculations that the Bank o f England may surprisingly lift interest rates to 5.75% on monetary policy meeting ended Thursday morning. The currency reached as high as 2.0205 against the dollar on Wednesday.
The euro stands firmly above the 1.36 handle versus the dollar. Euro-zone services PMI increased from 57.3 to 58.3 in June, indicating manufacturing activity growth quickened. While another report showed retail sales in the euro-zone increased less than expected in May. The market will focus on the European Central Bank interest rate announcement tomorrow morning. It is widely expected that the ECB will keep rates at 4.00% unchanged. ECB Governor Trichet will give a speech at the post-meeting press conference at 8:30 EST. Should he speak in hawkish tone about inflation, the market will take this as a signal for further rate increases, which will give the euro a boost. In the past, analysts usually look for the word “vigilance” in his word to assess the central bank’s attitude towards inflation control.
The British pound extended its gains versus the dollar on speculations that the Bank o f England may surprisingly lift interest rates to 5.75% on monetary policy meeting ended Thursday morning. The currency reached as high as 2.0205 against the dollar on Wednesday.
The euro stands firmly above the 1.36 handle versus the dollar. Euro-zone services PMI increased from 57.3 to 58.3 in June, indicating manufacturing activity growth quickened. While another report showed retail sales in the euro-zone increased less than expected in May. The market will focus on the European Central Bank interest rate announcement tomorrow morning. It is widely expected that the ECB will keep rates at 4.00% unchanged. ECB Governor Trichet will give a speech at the post-meeting press conference at 8:30 EST. Should he speak in hawkish tone about inflation, the market will take this as a signal for further rate increases, which will give the euro a boost. In the past, analysts usually look for the word “vigilance” in his word to assess the central bank’s attitude towards inflation control.
Euro-Zone retail sales down 0.5% in May
Retail sales volume in the 13 countries that share the euro slowed more than expected in May.
The volume of retail trade fell 0.5% on the month but rose 0.4% on the year, said Eurostat. This was a sharper fall than expected. Economists had predicted that sales volume would fall 0.3% in May.
Eurostat also revised down its estimates for sales growth in April to a 0.1% decline on the month and 1.5% growth on the year, having previously calculated that sales grew 0.2% on the month and 1.6% on the year.
The volume of retail trade fell 0.5% on the month but rose 0.4% on the year, said Eurostat. This was a sharper fall than expected. Economists had predicted that sales volume would fall 0.3% in May.
Eurostat also revised down its estimates for sales growth in April to a 0.1% decline on the month and 1.5% growth on the year, having previously calculated that sales grew 0.2% on the month and 1.6% on the year.
UK CIPS index rose to 57.7 in June
The UK's services sector, which accounts for nearly three quarters of the whole economy, rebounded in June after two muted readings.
The June business activity purchasing managers' index from the Chartered Institute of Purchasing and Supply came in at 57.7, higher than May's 57.2 and beating expectations of economists.
The employment sub-index climbed to 54.5 from 54.1. Meanwhile, business expectations improved, rising to 73.7 from 72.0.
The June business activity purchasing managers' index from the Chartered Institute of Purchasing and Supply came in at 57.7, higher than May's 57.2 and beating expectations of economists.
The employment sub-index climbed to 54.5 from 54.1. Meanwhile, business expectations improved, rising to 73.7 from 72.0.
Tuesday, July 3, 2007
Pound Holds Near 26-Yr High, Awaits BOE
The greenback continues to trade under pressure against the euro and sterling on Tuesday. The British pound hovers near the 26-year high at 2.0194 touched in the European session, while the euro stays around 1.36 versus the dollar.
The market is pretty bearish on the dollar and is currently concerns more about the global interest rate differentials than economic data. The dollar was little changed after a run of mixed US data this morning. US pending home sales unexpectedly declined 3.5% in May, raising worries about the housing market in the US. Factory orders dropped 0.5% in May, better than an estimate of –1.2%. Durable goods orders fell 2.4%, slightly better than the forecast of –2.8%.
US financial markets will be closed for Independence Day on Wednesday and therefore the currency market is likely to be slow due to relatively low trading volume.
The market is pretty bearish on the dollar and is currently concerns more about the global interest rate differentials than economic data. The dollar was little changed after a run of mixed US data this morning. US pending home sales unexpectedly declined 3.5% in May, raising worries about the housing market in the US. Factory orders dropped 0.5% in May, better than an estimate of –1.2%. Durable goods orders fell 2.4%, slightly better than the forecast of –2.8%.
US financial markets will be closed for Independence Day on Wednesday and therefore the currency market is likely to be slow due to relatively low trading volume.
USD Struggles, GBP 26-yr High
At 10:00 AM US May Pending Home Sales (exp 0.2%, prev -3.2%)
US May Factory Orders (exp -1.2%, prev 0.3%)
US May Durable Goods Orders (exp -2.8%, prev -2.8%
The dollar continued to lose ground against the majors ahead of anticipated monetary policy tightening from the ECB and BoE later in the week. The greenback fell to its lowest level in 26-years versus the sterling at 2.0194 and relinquished the 1.36-handle against the euro. With the European Central Bank and the Bank of England both largely expected to raise interest rates by 25-basis points and the Fed seen remaining on hold for the remainder of the year, traders have rewarded the currencies with hawkish central banks.
Despite the holiday-shortened week for the US market, the calendar is complete with key economic reports. In the session ahead, data slated for release consist of May pending home sales, factory orders and durable goods orders. The May pending home sales are seen increasing by 0.2%, improving from a 3.2% decline in the prior month. The factory orders’ reading is expected to fall by 1.2% versus a 0.3% increase from April. Meanwhile, May durable goods are seen unchanged from the previous month, holding steady at -2.8%. The key focus however, will be Friday’s labor report, providing a gauge on how resilient the jobs market is to the continued slowdown in the US economy.
US May Factory Orders (exp -1.2%, prev 0.3%)
US May Durable Goods Orders (exp -2.8%, prev -2.8%
The dollar continued to lose ground against the majors ahead of anticipated monetary policy tightening from the ECB and BoE later in the week. The greenback fell to its lowest level in 26-years versus the sterling at 2.0194 and relinquished the 1.36-handle against the euro. With the European Central Bank and the Bank of England both largely expected to raise interest rates by 25-basis points and the Fed seen remaining on hold for the remainder of the year, traders have rewarded the currencies with hawkish central banks.
Despite the holiday-shortened week for the US market, the calendar is complete with key economic reports. In the session ahead, data slated for release consist of May pending home sales, factory orders and durable goods orders. The May pending home sales are seen increasing by 0.2%, improving from a 3.2% decline in the prior month. The factory orders’ reading is expected to fall by 1.2% versus a 0.3% increase from April. Meanwhile, May durable goods are seen unchanged from the previous month, holding steady at -2.8%. The key focus however, will be Friday’s labor report, providing a gauge on how resilient the jobs market is to the continued slowdown in the US economy.
Greenback Extended Loss
The greenback extended its loss across the board on Monday as concerns over subprime mortgage meltdown and the Fed future policy move continue to weigh on investors sentiment. The dollar hit a 26-year low versus the British pound at 2.0172, while dropped to a 7-week low against the euro and the pair is on the way to attempt a multi-year high at 1.3680 set in late April.
The European Central Bank and the Bank of England will hold monetary policy meeting this Wednesday and are widely expected to hold interest rates at 4.00% and 5.50% respectively. There is still some speculation that the BOE may lift rates and surprise the market again. Both of the banks are likely to issue a pretty hawkish statement on the economy and inflation to set stage for at least one more rate hike in the second half of the year.
Earlier in the session, the dollar was little changed after a report showed US manufacturing ISM index for June came in at 56 as expected, slightly above the previous reading of 55. The market tomorrow will look to Swiss CPI, US durable goods orders, US pending home sales, and US factory orders.
The European Central Bank and the Bank of England will hold monetary policy meeting this Wednesday and are widely expected to hold interest rates at 4.00% and 5.50% respectively. There is still some speculation that the BOE may lift rates and surprise the market again. Both of the banks are likely to issue a pretty hawkish statement on the economy and inflation to set stage for at least one more rate hike in the second half of the year.
Earlier in the session, the dollar was little changed after a report showed US manufacturing ISM index for June came in at 56 as expected, slightly above the previous reading of 55. The market tomorrow will look to Swiss CPI, US durable goods orders, US pending home sales, and US factory orders.
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