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Daily U.S. Forex Summary

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The US dollar rose today following a lower−than−forecast drop in US home prices

Wed, Jul 1 2009, 05:45 GMT
by Union Bank of California Team

Union Bank of California

The US dollar rose today following a lower-than-forecast drop in US home prices and lower consumer confidence data. The Case Shiller home price report, an index of home prices in 20 leading metropolitan areas, fell -0.6% in April. The report, while lower than expected, also reported that home prices fell -18.1% from the previous year. US Consumer confidence also fell to 49.3 in June from 54.9 the previous month indicating consumers remain uneasy over economic conditions. The disappointing data heightened risk aversion sending investors for the safety of the US dollar. Markets are looking forward to Thursday’s release of US payroll data for further direction on the US economy.

The euro gave up early gains, shedding over 1.5 cents from highs at 1.4150 following the release of the US economic data. Investors remain cautious as they await the European Central Bank meeting and unemployment data due Thursday.

The British pound also trimmed gains after climbing to 8-month highs vs. the dollar at 1.6744 after disappointing GDP data. First quarter GDP fell -8.54% in the worst reading since 1958 and led the pound to tumble over 3 cents vs. the dollar. The data dimmed hopes that the UK economy was on track for a recovery ahead of the rest of the Euro Zone.

The Japanese yen fell after Japanese unemployment rose to 5.2% in May. Japanese construction orders fell -41.9% in May highlighting the continuing difficult economic circumstances. The yen has also been pressured by an increased risk appetite after US equity markets rose 1.1% Monday.

The Canadian dollar dipped versus the US dollar following the release of Canadian GDP. GDP fell -0.1% in April in the 9th straight month of declines. The loonie came under pressure from dollar strength and oil prices early Tuesday. Oil fell below $70 a barrel after reaching $71.71 yesterday, its highest level since October 2008. Canadian dollar prices often move in the same direction as oil prices due to the country’s heavy dependence on oil exports. Canadian markets are closed tomorrow for Canada Day.

The Australian dollar rose to two weeks highs before shedding gains versus the US dollar. The Aussie dollar was weighed down by lower oil prices following surging equity and commodity prices on Monday. Traders will eye domestic economic data set to be released Wednesday when retail sales and building approvals will be released.

The New Zealand dollar also gave up initial gains versus the dollar. The kiwi was supported by a private bank survey which showed confidence gaining for the 4th consecutive month, renewing hopes that the economy may be emerging from its worst recession in decades. The Reserve Bank of New Zealand hinted there was little chance of a rate increase as it said economic stability was still a greater concern than inflation presently.

Published on  Wed, Jul 1 2009, 05:50 GMT