US equities were sharply weaker in the NY morning, with S&P falling to 1326 following the release of housing, manufacturing and consumer confidence data. That brought about some risk aversion, which helped the USD to pare some of its sharpest losses but overall, the USD remained weaker as we progress through the NY session.
Here's a round-up of the data:
- The S&P/Case Shiller 20-city House Price Index was down 4.5% on the year in May, extending the decline in housing prices this year.
- New home sales were weaker than expected, falling to a 312K annualized rate in June, from a downwardly revised 315K rate in May. Forecasts had called for a 321K annual pace.
- The Richmond Fed Manufacturing index slid to -1 in July from 3 in May, lower than expectations of an increase to 5.
- The Conference Board Consumer Confidence index rose to 59.5 in July from 57.6 in June, which beat expectations of a slight decline to 57.1.
The main surprise in the data comes from the consumer confidence report, and it may help to ease some of the concern around weaker consumer spending in the economy. The present situation index fell to 35.7 from 36.6, but the future expectations index rose around 4 points, to 75.4 compared to June's 71.6.
Consumers have come under strong pressure from a wide array of negative news, including weak growth, persistently high unemployment, weak housing, higher energy and food prices, and the US debt crisis. Therefore its a bit of a surprise to see this index gain. The improvement comes from the future outlook, as we continue to see consumer's views of the current situation sliding.
The other reports showed the trouble the US economy as a whole is facing with housing continuing to be a drag on the economy and manufacturing still slow to recover from the supply side disruptions we had in the 2nd quarter.
The start of the NY session saw the USD pare some of its steeper losses against key rivals from overnight (EUR, GBP, AUD) following its broad weakness in the overnight session on the back of the US debt impasse. We saw a bit of "risk-off" here as the S&P dipped after the open of cash trading in US equities. However, overall the USD remains broadly lower as a result of the lack of progress in Washington.
Today's data is not having a very strong impact on currency markets, and we therefore await key 2nd quarter GDP data on Friday as well as further developments from Washington.
Chief Market Analyst