• USD broadly stronger on better-than-expected housing data

  • EUR stronger on better-than-expected PMI data

  • Commodity currencies are slightly lower after the release of weaker PMI in June

USD – The dollar held strong against a basket of currencies, but weakened against its European counterpart on stronger PMI data out of the Eurozone. The dollar held stronger after the release of new home sales in the US. Americans bought new homes in June at the fastest pace in five years. The Commerce Department stated that sales rose 8.3% last month to a seasonally adjusted pace of 497,000. That’s up from 459,000 in May. New home sales have risen 38% in the past 12 months, the biggest annual gain since January 1992. Analyst’s will turn their attention to durable goods figures, unemployment and consumer sentiment data due out tomorrow and Friday for further direction on the US economy.

EUR – The euro pushed higher against the dollar after the release of strong PMI data. In Europe, the flash composite PMI figure rose to an 18-month high in July. The figure came in at 50.4 indicating expansion in the manufacturing sector. French PMI figures beat expectations in July, with a figure of 49.8 versus estimates of 48.8, while Germany’s figure was particularly strong with a reading of 52.5 versus 50.8. The market will look to see if down-side risk to Europe’s economic outlook has diminished. However, with the IMF recently revising their forecast calling for the Eurozone to shrink to 0.6% this year, and the focus on the widening interest rate gap between the US and the Eurozone, look for the euro’s gains to remain capped.

GBP – The pound is relatively flat today after the release of the Confederation of British Industry (CBI) data. The CBI survey rose to -12 from -18 in June, above expectations of a reading of -15. This was the highest reading since last December and better than the long-run average of -17. Traders will turn their attention to tomorrow’s Q2 GDP data, widely expected to come in at .6% growth, a positive sign, indicating that the economy may be in the midst of a sustainable recovery. Still, many analysts do not expect major sterling movements until the next inflation report is released and the BoE clarifies its monetary policy stance.

JPY - The yen is weaker today vs. the greenback, down .73% from yesterday’s close and currently trading slightly above the key technical level of 100. Japan’s merchandise trade data came in weaker than expected, disappointing on both import and export fronts, putting downward pressure on the local currency. Investors now turn their attention to tomorrow’s release of June CPI numbers which are expected to rise slightly year over year.

Commodities - The Canadian dollar is flat, with limited data through the remainder of the week leaving CAD vulnerable to broader market sentiment. However, yesterday's better-than-expected retail sales release reinforced CAD support levels despite renewed worries over China which has hit emerging market shares and commodity-linked currencies. As such, the Australian dollar fell after activity in China's manufacturing sector slowed to an 11-month low in July as new orders faltered and the job market dampened. The AUD is highly sensitive to news out of China, Australia's top export market, and has erased earlier gains it had made following positive domestic inflation data. Meanwhile, the New Zealand dollar slipped 0.38% from yesterday’s close against the USD, as weak Chinese data stoked concerns of slower demand for New Zealand's dairy, the nation's biggest export product. Attention now shifts to the policy announcement from the RBNZ planned for tomorrow morning, where the central bank is widely expected to keep rates on hold at 2.5%. None the less, statements from the meeting will be heavily analyzed for hawkish or dovish hints.


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