* The dollar traded mixed in a narrow range on Tuesday. US house prices posted their second consecutive month-on-month increases and consumer confidence climbed more than expected, adding to signs the US economy is recovering. The re-nomination of Federal Reserve Chairman Ben Bernanke removed another uncertainty for investors. The S&P 500 rose 2.43 points to 1,028.00. The euro, tracking the stock market, was little changed. Sterling was unable to hold above the 1.64 handle despite a jump in UK mortgage approvals. The Australian and Canadian dollars declined following a sell-off in the commodity markets. The Swiss franc rose despite weak employment and consumption reports.
* The USD/JPY fell today. Having tested the 94-area support the last few days, the pair has not got much support from rising US stock prices. If the 94-area support is broken, the USD/JPY may fall to 92. Japan’s election will be held on August 30. The latest election polls indicate that the opposition Democratic Party will win. The party has promised to increase spending to boost the Japanese economy.
Financial and Economic News and Comments
US & Canada
- US house prices posted a 14.9% y/y decline in Q2 2009, still a negative rate but an improvement from a record 19.1% y/y drop in Q1, according to data released by Standard & Poor’s for its S&P/Case-Shiller home price indices. The 10-city and 20-city composites in June posted declines of 15.1% y/y and 15.4% y/y, respectively; however, showing improvements from their recent respective record drops of 19.4% y/y and 19.1% y/y. The 10-city and 20-city composites registered their second straight month-on-month gains. Both indices rose 1.4% m/m in June, and rose 0.5% m/m in May. Overall, the figures indicate a turnaround in the US housing market.
- The Conference Board US consumer confidence index rose more than expected to 54.1 in August, the first rise since May, from an upwardly revised 47.4 in July, data from the Conference Board showed. The present situation index increased to 24.9 in August from a downwardly revised 23.3 in July. The expectations index climbed to 73.5, the highest level since December 2007, from July’s upwardly revised 63.4.
- US house prices increased a slightly more-than-expected 0.5% m/m in June after a downwardly revised 0.6% m/m gain in May, according to the Federal Housing Finance Agency’s monthly house price index. June house prices fell 5.0% y/y. In Q2 2009 house prices declined a more-than-expected 0.7% q/q after Q1’s 0.5% q/q slide.
- The Richmond Fed manufacturing index held steady at 14 in August, indicating manufacturing activity in the central Atlantic region grew for a fourth consecutive month, the latest survey by the Federal Reserve Bank of Richmond showed. Among the index's key components, shipments rose to 21 from 16, new orders declined to 18 from 24, and the jobs index increased to 0 from -5.
- Germany’s GDP rose a seasonally adjusted 0.3% q/q in Q2 2009, the first rise since Q1 2008, after a 3.5% q/q contraction in Q1, final Q2 GDP data from the Federal Statistical Office confirmed. The Q2 rise was supported by a 0.4% q/q increase in government spending and a 0.7% q/q advance in private consumption. Construction investment rose 1.4% q/q and capital investment increased 0.8% q/q. Exports, falling less than imports, declined 1.2% q/q in Q2 while imports fell 5.1% q/q; thus, the export surplus contributed 1.6 percentage points to GDP growth. The German economy contracted 5.9% y/y wda and 7.1% y/y nsa in Q2 after falling 6.7% y/y wda and 6.4% y/y nsa in Q1, unchanged from the August 13 previously reported.
- UK mortgage approvals rose more than expected to 38,181 in July, the highest level since February 2008, from an upwardly revised 35,564 in June, figures from the British Bankers’ Association showed, indicating the UK property slump is easing.
- Switzerland’s employment level declined a more-than-expected 0.4% y/y in Q2 2009 to 3.945 million from 3.959 million in Q2 2008, according to data from the Swiss Federal Statistical Office.
- New Zealand’s 1-year-ahead consumer-price inflation expectations were unchanged at 1.8% q/q in the Q3 survey, while the 2-year-ahead expectations increased to 2.3% q/q from the Q2 survey’s 2.2% q/q, according to the September 2009 Reserve Bank of New Zealand survey of expectations.
FX Strategy Update