USD: A strong set of economic data released yesterday along with a moderate “risk off” tone this morning has helped to push the USD just above the key 85.53 level this morning but the action was tepid. US new motor vehicle sales in June could be on track to posting their best month since late 2007 and Factory orders rose for the second consecutive month in May which helped to solidify that the US economy is continuing to grow, albeit at a very moderate pace. Furthermore, a report released by a private data analysis firm yesterday suggested that house prices rose 2.6% in May from April and were up 12.2% compared to May of last year. The strong action in the housing market continues to rest as the foundation for the rebound in US economic confidence. The string of supportive data continues to point towards the Federal Reserve slowly backing away from their robust bond purchasing program. Asian shares tumbled overnight following a services PMI reading in China that showed softening in the services sector. The softer open to European equity markets, expectation for the ECB to leave their easy money policies in place tomorrow while the US is on holiday and the tensions in Egypt with fears of it spreading to peripheral countries, may help keep a well-established support base underneath the US Dollar as we head into the unemployment report on Friday.
EUR: The key 130.00 level was breached yesterday and a new low for the move was made for the September Euro overnight as political tensions rise in Greece and Portugal. The Portuguese Prime Minister refused to accept the resignation of his foreign minister and there was additional talk that that 2 more government ministers were set to tender their resignations as well. Fears the country may not stay committed to their bailout program helped to push bond yields higher and spark a bit of risk of anxiety for the Euro-zone. ECB officials are set to meet on Thursday and it’s highly unlikely that any withdrawal of the current easing measures is seen. In fact, there is some talk that ECB officials may follow in the footsteps of the US Federal Reserve and begin to provide forward guidance as a way increase stimulus and reduce volatility by guiding markets where interest rates may be in the future. The Euro-zone services PMI came in at 48.3 vs. expectations of 48.6 which is viewed as negative for the Euro. Additional downside, perhaps down to the 129.00 level is likely although a moderate amount of short covering may be seen ahead of the tomorrow’s meeting.
GBP: A rebound in UK manufacturing activity data ahead of the key British central bank meeting on Thursday helped to spark a short covering move in the September Pound overnight. The Pound made a new low for the move early on but strong economic data helped to push the contract above yesterday’s highs. The economic data is showing further evidence that the UK economy is attempting to stabilize although traders see the central bank leaving their easing measures in place tomorrow. The risk off tone in the Euro-zone, triggered by flared up anxiety in Portugal and Greece are seen as limiting factors for an extreme advance higher. Talk that the British central bank officials may follow in the footsteps of the US Federal Reserve and begin to provide forward guidance as a way to increase stimulus and reduce volatility by guiding markets where interest rates may be in the future are being viewed as negative for the direction of the Pound. The September Pound may find resistance at 1.5275 ahead of the meeting tomorrow. If easing measures remain in place, a continuation of the downtrend towards the May lows may be in order.
JPY: Strong “risk on” sentiment yesterday helped provide support for US equities and this pushed the September Yen through key support at 100.00. Sluggish service PMI data released from China overnight along with rising tensions in Egypt helped to recover a portion of the losses seen yesterday for the Yen. Issues related to the Chinese credit crunch seem sidelined for now although fears that their economy is slowing helped to push US equity indices lower overnight, resulting in a rebound for the Yen although strong pushback was found near yesterday’s high. Risk anxiety stemming from the Euro-zone is seen as a supportive factor for the Yen although strong sets of economic data from the US so far this week and a key unemployment report on Friday could act as the template to push the September Yen back towards the May lows in the weeks ahead.
CHF: Tensions continue to flare up in Greece and Portugal which is helping to keep the September Swiss in a steady downtrend although weakness in the Euro this morning is providing some moderate support. Yesterday’s lows have held thus far and the inter-day range remains narrow despite the lower trade for Euro-zone equity indices following a lackluster service PMI reading. While certainly the Swiss economy has shown slightly better economic data as compared to its neighbors, weak employment data continues to leave doubts about the longer term prospects of their economy which should keep overhead pressure on the Swiss. The September contract is finding light support around the 105.00 level which may hold today if further losses are seen in the Euro.
CAD: The September Canadian forged a new low for the move yesterday on the heels of broadbased weakness in the “commodity currency” market, led by losses in the Aussie Dollar. Talk that the Bank of Canada was set to leave their easy money policies in place while continued strength in the US housing and automobile sectors suggested the US Federal Reserve may scale back their monetary stimulus and that helped to pressure the Canadian. The September Canadian looks as though it wants to consolidate just under the 95.00 mark as we inch closer to the US unemployment report on Friday. Further improvement in the US employment situation should act as the catalyst for a resumption of the downtrend.