- In NY trading Tuesday, the dollar was higher against the euro but lower versus the yen. US home prices continued to improve, but consumer confidence unexpectedly fell for a second month. The S&P 500 index declined 3.54 to 1,063.41. US bond yields fell as a $44 billion sale of 2-year notes drew strong demand. The dollar index rose for a fourth day. The yen advanced on increased risk aversion and profit taking. The Australian dollar was little changed. Australia's business confidence climbed to a 7-year high. The USD/CAD fell for the first day in four after being unable to penetrate the 1.07 resistance.
- The EUR/USD fell for a third day. Bank lending to households and companies in Europe posted their first record annual decline in September. After failing to break the 1.50-area resistance on Friday and yesterday, the EUR/USD is now consolidating earlier gains. There are important support at the 1.48 handle and significant resistance in the 1.50 area. If the long-term uptrend is broken, the pair will turn bearish.
Financial and Economic News and Comments
US & Canada
- US house prices continued to improve in August, according to the S&P/Case-Shiller home price indices. The 10-city and 20-city composites for August declined 10.6% y/y and 11.3% y/y, respectively; however, showing improvements from their July respective drops of 12.8% y/y and 13.3% y/y. The 10-city and 20-city composites registered their fourth consecutive month-on-month gains in August, climbing 1.3% m/m and 1.2% m/m, respectively, following their July respective rises of 1.7% m/m and 1.6% m/m. Overall, the data suggest a continuing turnaround in the US housing market.
- US consumer confidence unexpectedly declined for a second month in October. The Conference Board US consumer confidence index fell further to 47.7 this month from an upwardly revised 53.4 in September, with labor market conditions playing a major role in this grimmer assessment, the Conference Board reported. The present situation index declined to 20.7 in October, its lowest level since 1983, from 23.0 in September. The expectations index fell to 65.7 from September's 73.7.
- The Richmond Fed manufacturing index unexpectedly fell to 7 in October from 14 in September, showing manufacturing activity in the central Atlantic region expanded for a sixth consecutive month albeit at a more moderate pace, according to data from the Federal Reserve Bank of Richmond. Meanwhile, service sector activity in the region slumped and retail sales dropped this month, according to a separate report from the Richmond Fed.
- UK high street sales posted the most positive result in almost two years in October and stronger sales growth is expected in November, according to the Confederation of British Industry's October distributive trades survey. The survey result showed 41% of retailers said year-on-year sales volumes rose in October, while 33% said they fell, for a resulting balance of 8%, the highest reading since December 2007, following September's balance of 3%. Survey respondents predicted year-on-year sales volumes to improve in November, with a balance of 19%, the most optimistic reading since July 2007.
- The NAB Australian business sentiment index rose to 16 in Q3 2009 from -4 in Q2, indicating Australia's business confidence rose to its highest level since Q1 2002, the National Australia Bank reported. Business conditions improved in Q3 due to increasing sales and profits, with the business conditions index rising 14 points to 3. The figures suggest near- and long-term business expectations will continue to improve.
FX Strategy Update