The US dollar continued yesterday's rally, gaining 0.55% against the yen and 0.77% against the kiwi dollar following a weaker global equities market and disappointing US jobless claims data. Initial jobless claims increased to 484k vs. the previous 465k in the week ended August 7, the highest level since February further fueling investor's appetite for the low yielding dollar.
Currently, the market is trading highly on risk sentiment, therefore increase speculation of an economic slowdown are sending investors to the safe-haven dollar and yen. Consumer price index and retail sales for July are scheduled for release tomorrow, with expectation of an improvement on both data. University of Michigan confidence tomorrow should also show signs of economic relief should data holds up to expectations.
The euro remained under pressure this morning after yesterday's drop of 2.38% against the greenback. A report showed European industrial production unexpectedly contracted in June printing -0.1% vs. the forecasted 0.7%, further adding to the speculation that the global economic recovery may be faltering. Yesterday's profit taking selloff was further supported by renewed concerns of Ireland's sovereign debt risk following a resurfaced larger than expected loss reported from the Bank of Ireland.
The British pound fell 0.50% against the dollar as it is being weighed down by downward revision of yesterday's quarterly inflation report. The GBP/USD fell below the 1.5600 support level today, with further downside potential as no relevant economic releases are scheduled for the region until Tuesday. The pair will be trading largely on risk sentiment as well as USD strength.
The Canadian dollar reached a 3-week low against the dollar as commodities and US equities dropped on signs of an economic slowdown. Yesterday's trade data showed Canada's trade deficit widened to C$1.13B in June and crude oil, the nation's largest export, dropped 1.3%, currently at 76.70/bbl, further pressuring the loonie.
The Japanese yen gave up yesterday's gains, falling 0.55% against the dollar. The Bank of Japan was rumored to be checking rates in the market as part of a potential currency intervention. However, Finance Minister Noda during his press conference, commented that he had no plans to confer with his counterparts in discussing current currency situations. Noda's comments dampened speculations of any BoJ intervention of the yen. On the data front, Japan's industrial production for June improved slightly from -1.5% to -1.1%, further supporting the strong yen.
The Australian dollar continued its slide as risk aversion remained strong. Australian labor reports came out mixed today with new jobs rising 23.5k vs. the forecasted 20.k. However, unemployment rate rose to a 3-month high of 5.3%.
New Zealand's dollar is one of the weaker majors today against the dollar, fell 0.77% and traded right below 0.7100. Retail sales are expected to be released later today with forecast at a slight improvement to 0.5% from the previous 0.4%.
Indications of Overnight rates:
10-Year Treasury Note Yield: 2.7302%
Dow Jones Industrial Average: 10345.61 -33.07%
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.