Forex: Daily Wrap Up – Traders bailing out of USD on soft updates
iNVEZZ.com Tuesday July 16th:
The euro has been rising against the US dollar throughout the day so far, climbing by more than 80 pips since the Asian session and supported by strong Eurozone data.
According to Eurostat, the Eurozone CPI for June y/y came out at a rise of 1.6 percent, matching expectations and up from May’s 1.4 percent. The month-on-month reading was 0.1 percent, again matching expectations and the same as in May. Core-CPI, which excludes food, energy, alcohol and tobacco, costs, was steady at 1.2 percent for June y/y, also in line with forecasts.
By contrast, the ZEW German economic sentiment, also out today, showed a drop of 2.2 points to 36.3 in July from 38.5 in June and below expectations for a reading of 39.6.
The USD has had mixed support today from US updates, but mainly it’s weakened against the euro and other major peers. Following the release of the US CPI data, the EUR/USD climbed to an almost one-week high at 1.3137.
The US Department of Labour reported at 15.30 BST that consumer prices rose by 1.8 percent in the June year, versus expectations for 1.5 percent. Month-on-month, prices were up 0.5 percent, against 0.3 percent expected. Core CPI, which strips out food and energy costs, rose by 1.6 percent over the 12 months to June and 0.2 percent m/m, matching estimates.
Subsequently, the Johnson Redbook Index came out as up 0.8 percent m/m and four percent y/y for the week ended July 7, against prior readings at -0.3 and 3.6 percent respectively.
US Net Long-term TIC Flows dropped by $27.2 billion in May from $21.8 billion in April, the Treasury Department advised today. Market expectations had been for $14.3 billion. Total Net TIC Flows increased to $56.4 billion from $28.3 billion.
Allowing for a degree of oscillation, the trend with the pair has so far remained bullish in the New York trading session.
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The yen has strengthened against the dollar since the opening in Tokyo, advancing more than 70 pips through the day to be at an intraday low at 99.23 in New York trading.
The USD has since tried to win back some ground, with the pair rising to 99.60, but the rally has looked unconvincing and the dollar remains under pressure.
The yen appears to be getting support ahead of the release of the minutes of the Bank of Japan’s most recent meeting, due out just before 01:00 BST tomorrow.
This was the meeting at which the BoJ decided to keep its monetary easing programme unchanged and gave a bullish outlook for the economy by using the word “recover” for the first time in more than two years.
Also during Asian trading tomorrow, the Ministry of Commerce of the People’s Republic of China will report on total investment capital of foreign enterprises, economic organizations and individuals.
Sterling has traded higher against the USD since the Asian session today, touching 1.5145 ahead of the European opening and before the UK inflation data for June disappointed the market and sent the pair to 1.5045.
Following the US updates, the pound advanced, again breaking the 1.51 barrier and stabilizing close to this level.
The UK’s National Statistics Agency reported today that annual inflation in Britain rose by 2.9 percent in June, following the 2.7 percent growth registered the previous month. Analysts had been expecting an increase of three percent. On a monthly basis the CPI fell by 0.2 percent in June, after climbing 0.2 percent in May and versus forecasts of a 0.1 percent drop. Year-on-year Core CPI grew by 2.3 percent, up from 2.2 percent in May and in line with forecasts.
Additionally, the Retail Price Index rose by 3.3 percent in June y/y, up from the 3.1 percent increase registered the previous month. Analysts had expected a rise to 3.4 percent. On a monthly basis the UK’s RPI fell by 0.1 percent in June, as against the prior month’s 0.2 percent rise and forecasts for no change.
The Bank of England is expected publish the minutes of its most recent policy meeting tomorrow at 09:30 BST. The minutes will show how MPC members voted at new governor Mark Carney’s first meeting at the helm.
And the Office for National Statistics will release labour market numbers at the same time, which economists are picking to show a fall in June’s jobless claims. The unemployment rate is forecast to stay unchanged at 7.8 percent in the quarter through May.
The USD has given up gains against the Swiss franc through the day, with the pair falling from an intraday high at 0.9494, reached earlier in European trading, to be at 0.9413 and threatening to break through this barrier.
The Swiss currency found support in the strong Eurozone data released today and also took advantage of fragile support for the US dollar ahead of US Fed chairman Ben Bernanke’s testimony on monetary policy at a Congressional committee tomorrow. The dollar’s resilience is further compromised by continuing speculation over the ‘tapering’ of the Fed’s $85 billion month bond-buying program.
The Australian dollar has clawed back two days of losses against the greenback with the pair advancing more than 150 pips since the Sydney session today, rising to 0.9237, an intraday high so far, in American trading.
The demand for Australia’s currency was supported by the confident tone of the Reserve Bank of Australia’s minutes for its June meeting, which were published today.
The minutes indicate that members of the governing board believe the bank’s policy stance to be correct and producing results, with the decline in the Aussie raising the prospects of a rise in inflation and, thereby, domestic production. The minutes also reveal that the country’s current account for the Q1 quarter had matched the central bank’s expectations.
The Australian dollar is now about 12 percent down from April, which has been stimulating Australian exports. And while China remains a major concern, yesterday the PRC’s GDP for Q2 of 2013 was reported as showing an improvement on a quarterly basis, despite the continuing decline over the last 12 months.
The Melbourne Institute is due to publish the Westpac Leading Index at 01:30 BST tomorrow, following which the Chinese Conference Board is expected to produce its Leading Economic Index at 03:00 BST.
The Canadian dollar has been lacking clear direction today, trading in the Asian session to an intraday high at 1.0441 against the USD, but with the pair dropping to hit 1.0394 following release of the US data.
The CAD was earlier supported by Canadian manufacturing sales which were reported as a 0.7 percent increase to $48.6 billion in May m/m, recording a second gain in the past five months and reversing in part April’s contraction of 2.1 percent. Sales increased in 11 of 21 industries, representing about 57 percent of the manufacturing sector.