The US dollar is claiming a third day of victory, rising against the major currencies except the yen after the Federal Reserve's announcement indicated that the economic growth had slowed, further fueling concerns that the global recovery is stalling. The dollar seems to be supported largely by risk sentiment today as disappointing US trade balance and Chinese PPI data triggered a selloff in US equities. Trade deficit unexpectedly expanded by $7.9B to $49.9B from a revised $42B in May. Ahead tomorrow, jobless claims and CPI for July is expected to be released with slight improvement.
The euro is trading significantly lower today, falling 1.80% against the dollar following a wave of risk aversion caused by profit taking selloff due to disappointing Chinese data. Chinese PPI printed 4.8% vs 5.9% eyed and retail sales fell to 17.9% vs 18.5% eyed. Negative data from the region is especially bearish for the euro as Eurozone growth has been contributed by the export sales to China.
The British pound tumbled for the third day against the dollar following Bank of England's indication that inflation will be at about 1.5% in two years, lower than the central bank's 2% goal. BoE Governor Mervyn King said overall outlook is weaker than that presented in the may inflation report. Furthermore, UK consumer confidence fell to 56 in July from 63 in June.
The Canadian dollar slid to a 2-week low against the dollar as commodities and equities dropped following the Federal Reserve's announcement yesterday. As Canada's largest trading partner, a stall in US economic recovery poses heightened concerns for Canada's growth outlook. Further putting pressure on the loonie is disappointing trade data for June, posting -1.1B vs -0.3B eyed. Later today, the Bank of Canada will auction C$3B 2-year bonds.
The Japanese yen continued its rally across the board as risk aversion flowed back into the market. The yen is benefiting from profit taking selloffs of risk related currencies, as USD/JPY fell through the 85.00 psychological level earlier in today's European trading session, however rebounded to 85.15. Today, Finance Minister Noda commented that the currency moves have been one-sided and that they are watching the markets closely. However, the government remains unresponsive to current yen levels. The yen will likely test a run below 85.00 this week should market remain dovish.
The Australian and New Zealand dollars dropped today as rising concerns of a stalling global economic recovery dampened investor demands for higher yielding assets. The Aussie remained increasingly pressured today after a report showed China's industrial output slowed. As Australia's largest trading partner, further disappointing data from China will further put pressure on the Aussie dollar.
Indications of Overnight rates:
10-Year Treasury Note Yield: 2.7105%
Dow Jones Industrial Average: 10422.58 -221.44%
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.