Daily market report Dollar Advances Versus Major Peers Before Housing, Claims Data - Euro May Not Hold 1.3300 if PMI Figures Point to Growth Troubles - British Pound Steady Strength Unable to Push GBPUSD Above 1.5700 The dollar advanced versus most of its major counterparts before housing and employment data that may signal continued recovery in the U.S., boosting the case for a reduction in central bank stimulus. The Bloomberg U.S. Dollar Index touched the highest in more than two weeks after minutes of the Federal Reserve’s July meeting showed most committee members were “broadly comfortable” with Chairman Ben S. Bernanke’s plan to start reducing bond buying this year. The euro strengthened against the yen before data that may show a pickup in European manufacturing and services. The Australian dollar rebounded after a gauge of Chinese manufacturing indicated expansion. The dollar added 0.6 percent to 98.24 yen as of 6:35 a.m. in London, after earlier touching 98.34, the most since Aug. 15. It gained 0.1 percent to $1.3341 per euro after climbing 0.5 percent yesterday. Europe’s shared currency reached 131.19 yen, the most since Aug. 5, before trading at 131.05 yen, 0.5 percent stronger than the close in New York. We open this morning in London with the Dollar stronger against the Pound at 1.5595. Sales of new homes were probably at an annualized pace of 487,000 last month, near the five-year high of 497,000 in June, a separate poll predicted before tomorrow’s report. Economists in another Bloomberg survey forecast that Labor Department data today will show continuing claims for jobless benefits fell to 2.96 million in the week through Aug. 10. Initial claims probably rose to 330,000 in the period ended Aug. 17, from 320,000 the previous week, which was the least since October 2007. “Almost all participants confirmed that they were broadly comfortable” with the Federal Open Market Committee moderating “the pace of its securities purchases later this year,” minutes of the central bank’s July meeting showed yesterday. The FOMC will probably reduce its monthly purchases of $85 billion in bonds at its Sept. 17-18 meeting, according to 65 percent economists in an Aug. 9-13 Bloomberg survey. The median estimate is a cut to $75 billion each month. When we exclude the proactive moves being made by the dollar and pound, the Euro performed well this past session. However, having to exclude these exceptions is an indication that the currency wasn’t under much power on its own. The market backdrop was certainly significant. The Euro Stoxx extended an substantial reversal that has developed following the two-month long 14.5 percent rally while Spanish and Greek 10-year government bond yields extended their respective rebounds. From the newswires, ECB Member Asmussen tried to play down German Finance Minister Schaeuble’s warning that Greece would need a third rescue – though he did not seem to deny it. Moving forward, we will look for a fundamental spark to generate momentum for the euro. On deck, we have the Euro-area PMI figures for August. These are timely measures of economic activity for the region, and can thereby give a growth view for investors. Though trailing the US dollar, the British pound was one of the strongest of the majors this past session. The strength wasn’t particularly stirred by specific catalysts from the past day’s docket. The BoE’s Weale had actually suggested further QE was an option and the UK reported its first July deficit since 2010. However, the backdrop for fundamentals is more reassuring. Given the steady rebound in economic health and the trend away from escalating stimulus efforts, the pound can continue to work of bearish positioning. Yet, that passive push can’t offset an active USD. Have a good day!
Posted on: Thu, 22 Aug 2013 09:10:13 +0000
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