Yen

The US currency pushed above the 200-day moving average during Asia on Wednesday and a sustained move above this level, currently around 107.15, would tend to ease underlying negative dollar sentiment.

There will, however, be an increase in dollar selling by exporters, especially on any gains towards the 108.0 level which may stifle any further gains.  The dollar held firm over the remainder of the day as the yen dipped to record lows against the Euro.

The US currency strengthened further in New York, but was unable to extend gains above the 108.0 level as profit taking was an important feature.

Sterling

Sterling held firm in early Europe on Wednesday. The latest minutes recorded that the Bank of England MPC committee voted 7-2 for unchanged interest rates in July with Blanchflower voting for a cut while Besley voted for an increase due to the need to control inflation expectations.

The minutes will provide some near-term Sterling support on yield grounds, especially as there was little apparent discussion of a cut in rates. Markets will also be looking to extend carry trades.

There will still be apprehension over the latest retail sales data which is due for release on Thursday, especially as there will be expectations of a sharp decline following the surprise surge in sales last month.

The data releases on Thursday were also weak with the CBI orders survey dipping to -8 from 1 the previous month while the overall sentiment index weakened to the lowest level for over six years. Mortgage approvals through the banking sector also weakened to all-time lows below the 25,000 level for June which will curb Sterling support.

Following the MPC minutes, Sterling strengthened to test levels beyond 0.79 against the Euro with a peak close to 0.7840. The UK currency was also resilient against the dollar with consolidation just below the 2.00 level.

Swiss Franc

The Swiss currency remained on the defensive during Wednesday, weakening to test levels beyond the 1.63 level against the Euro. The dollar also extended the sharp gains against the franc seen late in Tuesday with a peak around 1.04.

The sharp decline in oil and gold prices lessened immediate demand for the Swiss currency as risk appetite remained firmer.

A weak set of Euro-zone data would have a mixed franc impact and would be unlikely to provide strong support against the Euro.

Source: VantagePoint Intermarket Analysis Software

Australian dollar

The headline domestic consumer prices data was above expectations with a 1.5% increase to give a 4.5% annual rate while there was a 4.4% core annual increase which was the highest rate for 17 years. The data provided only a temporary Australian dollar lift with markets suspecting that the data was not strong enough to trigger higher interest rates.

The Australian currency will gain some support from an improvement in risk appetite and flows from Japan, but weaker commodity prices helped trigger a move to lows near 0.96.

Read Other

Recent Articles by Darrell Jobman