The US dollar was mixed today, trading stronger against the euro and weaker against the South Pacific currencies. Consumer price index posted favorable data for July, rising 0.3% from the previous -0.1% and 0.2% eyed, easing inflation fears. The University of Michigan also released their consumer confidence report which showed an improvement from 67.8 to 69.6 for August.
Retail sales, on the other hand, posted only a mere 0.4% gain vs. the 0.5% eyed. Excluding auto dealers and service stations, sales demand dropped -0.1% vs. the previous 0.1% and 0.1% eyed. Although retail sales fell short of expectations, positive CPI data coupled with strong consumer confidence provided much relief for the markets.
The euro continued to slide despite positive GDP numbers for the second quarter. The German economy expanded 2.2% while France expanded by 0.6%. Eurozone trade balance for June also posted positive numbers, with exports and imports increasing 2.4B vs. the previous -3.4B and 1.0B eyed. However, data was not enough to fend downward pressure, collapsing the euro to fall under 1.2800. The weak euro suggests that the market was more focused on the weaker than expected Italian bond auction and Ireland banking woes.
The British pound remained unchanged since yesterday's close of 1.5560 level. Economic data will be very light in the region until Tuesday's consumer price index release, therefore the currency will be traded largely on market sentiment. On the technicals, the GBP/USD will likely be pressured to reach the 200-day moving average level of 1.5511 later today or early next week.
The Canadian dollar recovered from a 3-week low following positive US consumer price data and stronger consumer confidence. The currency initially fell on signs of a slowing global economic recovery after the Federal Reserve's dovish comments this past Tuesday. However, today's positive US data has provided much relief for investors. Should global growth sentiment continue to improve, the loonie may see a rebound back to the support level of 1.0150 levels next week.
The Japanese yen was little changed since yesterday's close of 85.90. Earlier today, the yen traded near a 15-year high following increased speculation that the Bank of Japan will not take any action to intervene on the currency market despite demands from politicians for a weaker yen.
The Australian and New Zealand dollars pared gains against the dollar after risk recovered on positive market sentiment. This past week, the Aussie dollar gave up close to 2.5% and the kiwi dollar fell over 3.3% to the US dollar due largely on risk aversion. Furthermore, recent less than impressive Australian employment figures coupled with worrying trade data from China swayed investors from buying risky assets. With little economic data releases from the region next week, the currencies will continue to trade on risk appetite flows.
Indications of Overnight rates:
10-Year Treasury Note Yield: 2.7004%
Dow Jones Industrial Average: 10299.44 -20.51%
This market summary is prepared by Union Bank's Global FX Department for the general information of its customers. It is based on the most accurate information currently available, but should not be considered investment advice or a guarantee of future exchange rates or trends.