Meanwhile there was very little consistency in the USD's performance against the majors today as the greenback weakened against the JPY and EUR but strengthened versus GBP, NZD and CAD. U.S. data was mixed. According to S&P / CaseShiller, house prices declined 0.2% in the month of July. Economists had been looking for a rebound but the decrease was small and raises zero concerns about the overall housing market recovery. Consumer confidence rose strongly which was a bit of a surprise considering that similar surveys from the University of Michigan and Investors Business Daily reported deterioration in sentiment. With non-farm payrolls scheduled for release this week, the uptick in confidence raises hope for a further recovery in the labor market. Starting Wednesday, we turn our focus to the leading indicators for non-farm payrolls with the release of ADP's employment change report. Chicago PMI is also on the calendar and weaker manufacturing activity is anticipated after the surprise slowdown in the NY and Philadelphia regions.
Yesterday we said the worst performing currency was the New Zealand dollar and today, it is the day's best performer but overall NZD/USD remains weak because the rally fell short of covering Monday's losses. Since no economic data from New Zealand was released, today's move can be best attributed to the mild recovery in risk appetite and continued consolidation in the currency pair. Trading should get a bit more exciting this afternoon with NZ building permits and business confidence scheduled for release. The Australian dollar ended the day marginally higher on the back of the stabilization in commodity prices. Building approvals are also due from Australia this evening.
The big story today was USD/CAD, which climbed to fresh 11 year highs. Nine days have now past without a down day for the currency pair, the longest since August 2011. The persistent strength of the currency is surprising especially on a day when oil prices moved higher. Data from Canada was also better than expected with industrial product and raw material prices falling less than anticipated. The rally in USD/CAD is getting overstretched and tomorrow's July GDP numbers could halt the rise. Economists are looking for growth to slow but with retail sales and trade activity improving in July an upside surprise would turn around the currency.
Both euro and sterling ended the North American trading session unchanged. Eurozone confidence improved in the month of September but consumer prices in Germany declined more than expected. Bundesbank head and ECB member Weidmann doesn't seem to be worried. Earlier today he said concerns about deflation have dissipated further. German unemployment numbers are scheduled for release on Wednesday along with the Eurozone's latest unemployment rate and CPI report.
Eight trading days have now past without a rally for the British pound versus the U.S. dollar. Higher mortgage approvals in the U.K. were offset by weaker consumer credit. A long stretch of weakness or strength for the currency pair is not unusual. In late August for example, GBP/USD fell for 9 days straight before bottoming. In mid June, it rallied for the same number of days before reversing strongly. When GBP/USD turns, the move is strong and can range from 200 to 800 pips.
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