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.
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