Despite a weaker equities and commodities market today, the US dollar continued to slide, hitting fresh weekly lows against the euro and Japanese yen following a report showing the Federal Reserve may be considering another round of monetary easing. Furthermore, personal income and spending figures showed a stagnant growth for June vs. slight improvements from the previous month.
Pending home sales m/m were down -2.6% vs. +4.0% eyed. Recent disappointing US data releases indicate that the US economy may continue to remain sluggish into the new year. Ahead this week, non-farm payroll data for June is scheduled for release on Friday expected to be slightly improved from the last month.
The euro continued its climb against the dollar and yen today despite today's slightly weaker release of Eurozone PPI y/y at 3.0% vs. the 3.1% eyed. Yesterday's stronger PMI Manufacturing data seems coupled with the continued weakening of US economic data seems to have carried EUR/USD pair higher, breaching the 1.3200 level. During the ECB Interest Rate Announcement on Thursday, analysts are expecting positive statements from ECB President Jean-Claude Trichet, which should provide further support for the euro.
The British pound rose against the dollar for a 9th consecutive day. News of government-owned lender, Northern Rock Asset Management posting its first profit, indicating that the UK economy is strengthening. Continued positive sentiment coming from the region suggests the GBP/USD may breach the 1.60 psychological level very soon.
The Canadian dollar weakened against the majors following further disappointing data coming from the US. As Canada's largest trading partner, poor US data adds worries for investors who predict that Canada's economic growth may be impacted by a weakening US.
The Japanese yen reached an 8-month high against the dollar following a report showing weaker-than-expected US consumer and income data for June. Increasing concern on the recovery of the US economy led many investors to flee to the yen for safety. Furthermore, Japanese Finance Minister Noda noted yesterday that currency price actions should be set by the market, expressing no opposition to the current yen appreciation, further setting the dollar to fall past the 86.00 level against the yen.
The Australian dollar retraced from yesterday's 3-month high against the greenback after the RBA left benchmark rates unchanged for a 3rd straight month at 4.5%. During the post announcement statement, the RBA noted that inflation will remain above standard for a few quarters due to the impact of tax changes and increases in utility prices. However, there are no signs of a plan of action further suggesting that rates will remain stagnant for the next quarter. On the data front, a drop in building approvals for June and weaker-than-expected retail sales applied further downward pressure on the Aussie today.
New Zealand's dollar stayed near yesterday's highs against the majors as investors moved to the Kiwi for a substitute of the uncertain price action of the Australian dollar today. Ahead tomorrow, the unemployment rate for the 2nd quarter is scheduled for release at an expected rise of 6.2% vs. the previous 6.0%.
Indications of Overnight rates:
10-Year Treasury Note Yield: 2.9006%
Dow Jones Industrial Average: 10,663.59 -11.02
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.