In contrast to Fridays rally, US markets kicked of the week on a negative note with key indices reversing much of Friday’s gains. The balance of risk fell to the side of caution, evident in a reversal in the US Dollar which strengthened against major counterparts. Investors balanced mixed economic reports with US personal income growing 0.2 percent in July, but failed to reach the consensus target of 0.3 percent growth. US personal spending however rose above estimates recording 0.4 percent growth in July against the expected 0.3 percent growth.
After some slight relief on Friday, the Japanese Yen resumed its decent, currently around day lows of 84.5 Yen against the greenback despite new emergency steps taken by the Bank of Japan yesterday in the wake of the Yen reaching 15 year highs against the greenback. Although it looks like they are taking the bull by the horns and trying to create ceiling for Yen price action whilst spurring demand within Japan, judging by the subsequent currency reaction markets appear to be underwhelmed by the latest steps taken.
In times of adversity the Japanese Yen is seen as the ultimate currency safety-play, however recent times have seen Japanese officials warn against excessive strength of the Japanese Yen. A strong Yen makes exports become less price-competitive against competing economies, thus hampering an export fuelled recovery.
Locally, the Aussie dollar turned south late yesterday dropping through 90 US cents and continued to descend to current lows of 89.2 US cents throughout the US session. We have a raft of economic news this morning, and no doubt this will provide guidance for the Aussie dollar domestically. The main event is likely to be Retail Sales which is expected to rise 0.4 percent in July against a previous 0.2 percent gain.
Building approvals for July are expected to grow at an annual rate of 6.1 percent against a previous 13.2 percent. Current account balance is predicted to show a deficit of 6.5 billion in the second quarter and Private sector credit is expected to grow 0.3 percent in July.