The dollar fell on Tuesday against most of its major counterparts on more signs the US economy is slowing. The dollar index dropped for a fourth straight day to 80.60. US personal income and spending stalled in June, while pending home sales and factory orders decreased. The S&P 500 declined 5.40 to 1,120.46. The Japanese currency gained against all key currencies on global growth worries.
Japanese Finance Minister Yoshihiko Noda said currency rates should be determined by financial markets. The yen touched the highest level since November 27 and our short position stopped out. The euro hit a 3-month high and the GBP/USD rose to the highest level in six months. The Canadian dollar fell on slowing US economic growth.
The AUD/USD was little changed on Tuesday after being pressured by a less-than-expected increase in Australian retail sales and the Reserve Bank of Australia's decision to maintain the key interest rate at 4.50%. After making a bottom in June, the pair is now approaching the 0.92-area resistance and a test of this resistance is expected. If this is broken, the AUD/USD will likely rise to 0.94.
Financial and Economic News and Comments
US & Canada
US personal income was unchanged m/m in June after a downwardly revised 0.3% m/m gain in May, data from the Commerce Department showed. Personal spending was also unchanged m/m, following May's downwardly revised 0.1% m/m increase. Personal income rose 2.6% y/y in June; personal spending rose 3.1% y/y. Disposable personal income was unchanged m/m in June after a downwardly revised 0.3% m/m May advance. The savings rate rose to 6.4%, the highest level since June 2009, from May's upwardly revised 6.3%. The personal consumption expenditure deflator was down 0.1% m/m in June, a third consecutive monthly decline; however, increasing 1.4% y/y following May's upwardly revised 2.1% y/y rise. The core PCE deflator, which excludes food and energy, was unchanged m/m in June but up 1.4% y/y.
US factory orders fell for a second consecutive month in June, falling a more-than-expected 1.2% m/m to $406.4 billion, after a revised 1.8% m/m May drop, according to data from the Commerce Department. June factory orders rose 11.2% y/y nsa. Excluding transportation, factory orders fell 1.1% m/m to $360.3 billion in June, a third successive monthly slide, after a revised 1.2% m/m May decrease; however, they climbed 14.3% y/y nsa.
The NAR US pending home sales index, a leading indicator for the housing sector, declined 2.6% m/m to 75.7 in June after plunging a revised 29.9% m/m to 77.7 in May, suggesting US pending home sales fell for a second consecutive month in the post-tax credit market, a report from the National Association of Realtors showed. June pending home sales fell 18.6% y/y, following a 15.8% y/y May decrease.
Eurozone producer prices grew a marginally less-than-estimated 0.3% m/m in June, a ninth straight month-onmonth gain, after increasing at the same rate in May, according to PPI data from Eurostat. Producer prices rose 3.0% y/y, a fourth consecutive year-on-year rise but slowing from May's 3.1% y/y advance.
The CIPS/Markit construction PMI fell to a lower-than-anticipated 54.1 in July from 58.4 in June, showing UK construction activity expanded for a fifth successive month but at a slowest pace in four months, data from Markit Economics and the Chartered Institute of Purchasing and Supply showed; thus, suggesting that growth in the construction sector may have peaked.
Switzerland's consumer prices slid a slightly more-than-estimated 0.7% m/m in July, a third consecutive monthly slide, after a 0.4% m/m decline in June, according to CPI data from the Swiss Federal Statistical Office. The consumer-price inflation rate slowed to 0.4% y/y from June's 0.5% y/y.
Japan's monetary base rose 6.1% y/y in July, the largest year-on-year rise since August 2009, after a 3.6% y/y increase in June, a report released by the Bank of Japan showed.
Australia's seasonally adjusted retail sales increased a slightly less-than-expected 0.2% m/m to A$20.18 billion ($18.45 billion) in June, a fourth straight monthly gain, after increasing at the same rate in May, according to figures from the Australian Bureau of Statistics (ABS). June retail sales rose 2.2% y/y nsa, following a 0.6% y/y May advance. Adjusted to remove inflation, retail sales grew 0.8% q/q in Q2 2010 after a 0.1% q/q increase in Q1.
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