July 29th, 2014
Underlying dollar optimism remained intact Tuesday and the currency looked to push significantly higher across a wide range of pairs.
In Asia, the Japanese retail sales data was weaker than expected with a 0.6% decline in the year to June from -0.4% previously and unemployment increased to 3.7% from 3.5%. There were further expectations that the Bank of Japan could be forced into further monetary easing over the next few months, especially if the economy loses momentum and inflation dips lower again. The dollar was able to make some progress with USD/JPY moving to the 102.00 area in early Europe.
The latest raft of UK economic data was stronger than expected with mortgage approvals rising for the first time since March and stronger lending data which provided brief support to Sterling as GBP/USD made a fresh move towards the 1.7000 level.
Failure to break higher triggered a swift reversal and the downward move was enhanced by significant EUR/GBP buying, potentially in the context of month-end Euro demand from the Bundesbank. In this environment, GBP/USD dipped back towards 1.6950 for six-week lows.
There were further concerns that increased sanctions against Russia would have a greater negative impact on the financial sector and trade which would have an important adverse impact on the Euro-zone economy.
The dollar gained ground early into the US session as the market looked to take out important technical levels with a focus on 1.3420 for EUR/USD and 102.00 for USD/JPY as well as 1.6950 in GBP/USD.
There were underlying expectations of robust US data later this week and a more hawkish Fed tone in Wednesday’s Fed statement. The latest US consumer confidence data was stronger than expected with an increase to 90.9 for July from a revised 86.4 the previous month and this was the highest figure since October 2007 with a further improvement in the jobs measure bolstering expectations of a more optimistic Fed tone.
EUR/USD dipped to fresh 2014 lows just above 1.3400 as USD/JPY moved to a peak just below 102.10. Commodity currencies weakened as USD/CAD moved to highs near 1.0850 as AUD/USD dipped to lows around 0.9375. The New Zealand dollar was hit by weaker dairy prices and dipped to lows near 0.8500 and the weakest since the second week of June.
July 28th, 2014
The dollar was unable to extend gains on Monday with markets in a wait-and-see mode ahead of key economic and risk events later this week. The Nikkei index held firm with a move to six-month highs which tended to curb defensive yen demand to some extent, although the impact was limited. The Japanese currency was still broadly resilient despite potential adverse influences with USD/JPY trapped below 102.0 while EUR/JPY held below 137.0. Read the rest of this entry »
July 25th, 2014
The dollar overall held a firm tone on Friday without being able to make a decisive break through major technical levels while the Euro was on the defensive. A further improvement in German consumer confidence did not have a significant impact, but there was a negative reaction to the latest IFO release. There was a decline to 108.0 for July from 109.7, the third successive decline and lowest reading since October 2013 with companies more downbeat over export prospects. Read the rest of this entry »
July 24th, 2014
There has been no shortage of macro events and market reaction over the past 24 hours with the dollar maintaining a firm tone as several rival currencies hit trouble.
Centre-stage during the Asian session was the Reserve Bank of New Zealand interest rate decision. The bank delivered the expected fourth successive rate increase to 3.50%, but also signalled the expected pause in hikes. The main focus was on comments over an over-valued new Zealand dollar which was described as being at un-justified levels by Governor Wheeler. This phrasing inevitably triggered major speculation over intervention and NZD/USD plunged from highs above 0.8700 to lows below 0.8600. Read the rest of this entry »
July 23rd, 2014
The dollar held a solid tone on Wednesday without being able to build on gains seen over the previous 24 hours while the Euro attempted a weak recovery from multi-month lows and Sterling corrected lower.
The latest Australian consumer inflation data was slightly stronger than expected with a 0.5% second-quarter increase pushing the annual rate to 3.0% from 2.9% previously. The data dampened any expectations of further rate cuts by the Reserve Bank which helped underpin the Australian dollar. AUD/USD had already gained support after moving higher in the US session on Tuesday and a fresh move above 0.9400 helped trigger stops and highs around 0.9450.
Minutes from the Bank of England July monetary policy meeting were anxiously anticipated as markets waited for further evidence on a possible rate-hike timetable. Despite some speculation of a split vote, there was unanimous backing for interest rates to be left on hold at 0.50%.
There was evidence that spare capacity was being used at a faster than expected rate which bolstered the case for a rate increase. In contrast, there were increased concerns surrounding weak earnings growth and some tentative evidence that the economy was slowing. Underlying uncertainty tended to increase with signs of two clear camps emerging within the committee. Read the rest of this entry »