Overview: July 10, 2014 Fresh signs of economic fragility in Asia and Europe coupled with renewed debt jitters in Portugal proved a toxic brew that boosted the safer greenback against most peers. Global stocks plunged, causing market players to duck for cover in assets considered to be ultra-safe like the greenback and yen, which rose to July highs against its U.S. counterpart and its best in weeks versus the euro. The broad-based market selloff helped push the Federal Reserve, for now, to the backburner. A day earlier, the greenback had come under pressure after minutes from the central bank’s last meeting suggested officials were in no hurry to boost American borrowing rates from all-time lows near zero. The lack of clarity on the ongoing U.S. rate debate will serve to undercut rallies for the U.S. currency. The mid-June Fed minutes did signal an October end to the bank’s latest round of quantitative easing, a horizon that was generally in line with market thinking. The euro flirted with a breach below $1.36 as debt worries resurfaced in Portugal and factory numbers from Italy were the weakest since late 2012. China’s trade surplus narrowed while machinery orders in Japan tumbled nearly 20 percent. A steady Bank of England and a bigger U.K. trade gap weighed on sterling. U.S. jobless claims print at 8:30 a.m. ET. EUR The euro was booted from one-week highs of $1.3650 against the greenback as debt jitters in the euro periphery made a comeback and Italy reported the weakest factory output in May since November 2012. The fiscal shape of Portugal has been thrust back under the microscope amid worries about the health of one of the nation’s largest banks. Stocks across the continent were in selloff mode which has Wall Street headed for a decidedly weak open. Europe’s renewed debt pickle has helped overshadow the still to be determined timeframe for a Fed rate hike which has alleviated recent pressure on the greenback. A reminder of the weak state of affairs in Europe only keeps pressure on the European Central Bank to further ease monetary policy, a dovish outlook that should keep a near-term headwind on the euro. To the euro buyer, seize on favorable market movements since the dollar has struggled to retain appreciation amid the uncertain horizon for a Fed rate hike. GBP Sterling was close to tipping below $1.71, nearly a penny below recent multiyear highs. Slowing the pound’s ascent this week has been a spate of cooler than expected U.K. data like today’s trade figures that showed the nation’s trade gap swelled more than expected to £9.2 billion in May from a revised shortfall of £8.8 billion in April. Meanwhile, the Bank of England as expected voted to keep interest rates pinned at record lows of 0.5 percent. No statement was issued which is usually the case when policymakers refrain from making a move. Market players now await this week’s meeting minutes which are set for release on July 23. Buyers of the U.K. currency should capitalize some on favor market fluctuation given that the underlying sterling positive narrative remains in place. Sterling has enjoyed seemingly endless support from the impression that the BOE will be first among the world’s biggest central banks to hike lending rates. AUD A mixed local jobs survey coupled with a big market selloff weighed on the Aussie dollar which was escorted away from earlier one-week highs above $0.9450. Australia added a more than expected 15,900 jobs in June but declines the month before proved a bit bigger (-5,100 vs -4,800). Unemployment jumped to 6 percent from an upwardly revised 5.9 percent in May. The mixed shape of Australia’s job market helped justify recent dovish comments from Australia’s central bank chief who warned that rates may not have hit bottom. Elsewhere, adding to the uncertain outlook for China, a key Aussie export market, the Asian giant’s trade surplus narrowed more than expected to $31.6 billion in June compared to forecasts of $35 billion. CAD Dollar-Canada was in shallow positive territory, boosted by the risk-averse market and data showing that new home prices in Canada rose by an underwhelming 0.1 percent in May. This is your market loonie sellers but seize while the iron is hot because Canada’s jobs survey tomorrow looms as a key risk. The tone of the jobs report (forecasting an increase of 20,000 jobs and a steady 7 percent jobless rate) should carry some weight for the Bank of Canada which meets on Wednesday. USD The dollar stuck near session peaks against most rivals following another dose of good news on America’s job market. Weekly jobless claims unexpectedly improved, falling 11,000 to 304,000. Forecasts called for the weekly count to hold at 315,000. The labor market continues to make positive strides, keeping it on pace to extend its solid winning streak.
Posted on: Thu, 10 Jul 2014 15:27:32 +0000
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