USD - The dollar is at 3-month lows vs. a basket of currencies as worries of a faltering US economic recovery continue to weigh on the greenback. Today's positive Manufacturing Purchasing Manger's Index (PMI) at 55.5 in July showing the sector is expanding was unable to overcome the weaker economic reports last week that sent the dollar on its steady course downward. News that Durable Goods fell -1% in June and Consumer Confidence fell to 50.4 in July raised concerns that the US
economy was sputtering.
Last Friday's 2nd quarter GDP report at 2.4% from 3.7% in the previous quarter corroborated moderating economic growth and reinforced the notion that interest rates would remain low for an extended period. In comments today, Fed Chairman Bernanke said today the US
economy is improving but has yet to recover fully as high unemployment and a weak housing market continue to weigh on consumers. In this environment, market sentiment is on comparative growth prospects and with the US appearing to lag its peers, the dollar weak tone is set to continue in
the near term.
EUR - The euro hit 3-month highs vs. the dollar as growth concerns continue to weigh on the dollar. The single currency rose to highs at $1.3195 after breaking a key technical level at $1.3125. The euro is benefitting from favorable economic data in contrast to the plight of the dollar. The Eurozone Manufacturing Purchasing Manager's Index (PMI) rose to 56.7 in July, marking the 10th consecutive month above the 50 threshold signaling growth. The positive data follows last week's above
forecast Economic Sentiment report at 101.3, climbing to 28-month highs. Although the report portrays the bulk of the growth coming from Germany and highlights continuing divisions between the better and underperforming member countries, markets are focusing on the growth prospects between Europe and the US. Due to this, the euro is likely to remain supported in the near term until the US shows its recovery is back on track.
GBP - The GBP continued to strengthen last week to levels not seen since February. This comes despite consumer confidence coming in at an 11- month low last week. Stronger-than-expected retail sales helped drive the GBP higher last week, while this morning's better-than-expected (although lower than the prior month's manufacturing numbers) have pushed the currency up more than 1% - heading toward 1.6000. It is likely that this level will be tested this week as it is both a technical and
psychological level- although it is unlikely to break the first time around. Trading will be based on technicals this week as the only key releases will be PPI and industrial production.
JPY - The Japanese yen fell against most of it's major counterparts as signs of a global recovery have inspired investors to seek return in riskier currencies other than the USD and the JPY. Risk appetite crept back in the markets this morning as strong corporate earnings forecasts from Japan, positive housing and stronger manufacturing data from Australia, combined with weaker Chinese manufacturing contributed to a weaker US dollar and Japanese yen. The Nikkei was +0.35% higher this morning as heavy weights reported positive earnings forecasts for the rest of 2010,
putting doubts that the Asian recovery is slowing in the back of investors' minds for the time being. The USDJPY was trading a touch higher on the positively perceived combo of releases this morning, following Friday's trading session in which the USD/JPY hit a 2010 low of 85.95.
CAD - Markets in Canada are closed today for a holiday. The loonie continues to outperform against major currencies on upbeat domestic data along with firmer crude oil above $81 a barrel. Last Friday, Canada's May GDP data expanded 0.1% in May after slowing in April. During June, Canada's economy created five times more jobs than expected. The Bank of Canada raised interest rates for the second time in two months and rates are expected to continue to rise gradually. The loonie is
expected to remain strong in the near-term and may break through the 22- month high hit in April. This week, the market will eye the employment report, which is expected to show an increase of 15,000 jobs during July.
MXN - The Mexican peso gained to its strongest level since June as risk appetite increased, spurred by better-than-expected earnings release from European banks. Last week, Mexico posted favorable economic data with auto production back on the rise, increasing to a record 177,575 cars in June and output more than doubled. Mexico's economy grew 8.5% in May from a year earlier, further suggesting that continuing appreciation may take place to the next support level of 12.5200.
AUD - The Australian dollar continued its climb to the strongest level in almost three months against the dollar as the market maintained its appetite for high-yielding, growth related assets. Last week's slow-down in consumer prices y/y of a 3.1% rise vs. 3.4% eyed brought the Australian dollars back 1% last Wednesday, however analysts believe the move was largely corrective. Today's move above 0.9100 level suggests that upward pressures on the pair will continue until Thursday's RBA's quarterly monetary policy statement.