EUR/USD - Greenback Gains Overnight as Risk Aversion Returns
The Euro-Dollar pair, for a second straight session showed some big swings. Today’s session saw a strong move in favor of the greenback, effectively paring most of yesterday’s rally. Lower stocks in Europe, renewed worries about Eastern Europe, and concerns about the unfolding second quarter earnings season revived risk aversion overnight. The pair slid 180 pips from yesterday’s high, finding support at the 1.3880 level, and then saw a counter-rally prior to the end of trading for the week. Overall this week showed sideways price action, though the latter half saw more volatile swings.
EUR/JPY - Yen Benefits From Risk Aversion
The Yen fed of the overnight risk aversion to post gains against the majors. Here the Euro-Yen pair wiped away its gains from yesterday, though it did not go as low as Wednesday’s support near 127. The pair hit a low following a worse than expected US consumer confidence release. For the week, the Yen has been a strong performer as risk aversion has been a major theme. From Monday’s open the Euro is down 530 pips. The Yen was up against the Pound and Dollar as well.
UK - Factory Prices Slide at Fastest Annual Pace Since 2001
In the UK, the prices that UK factories received for their goods fell 0.2% in June, and are down 1.2% on the year. That is the biggest annual decline since 2001, and shows that the recession continues to sap inflationary pressures.
GBP/USD - Pound Set to Close Below Recent Power Line
With stocks sliding in London and risk aversion back, in addition to weaker prices, the Pound fell in today’s trading. It broke a short term line of support and fell to the 1.6160 area in NY afternoon trading. The pair is set to close the week below the line of support-turned-resistance that we have been watching.
US - UMich Consumer Confidence Slides in Mid-Month Report
Turning to US fundamentals, the UMich consumer confidence index fell more than expected in the July mid-month release. The index slid to 64.6, from June's 70.8 as both the current index and expectations index fell modestly. This confirms the data seen in the Conference Board's consumer confidence index which also disappointed forecasts on the downside. The continued increase in the unemployment rate is mainly responsible for the dip, which follows four months of gains in the index.
US - Trade Deficit Narrows to Lowest Level in Decade
The US trade deficit narrowed in May to its lowest level in almost a decade, surprising forecasts that expected the deficit to widen. Exports rose for the first time in 3 months, up 1.6%. Imports meanwhile fell 0.6%, as the US imported less foreign crude oil even as prices rose, reflecting lower demand for petroleum.
US - Import Prices Increase for 4th Month
And in a third release, US import prices rose 3.2% in June, the 4th straight month that prices have climbed. The resurgence of oil prices were the main factor pushing up prices. That increase surprised forecasts on the upside and was the largest jump in import prices since November 2007.
CAN - Employment Figures Better Than Expected
In Canada, the economy shed about 7,400 jobs in June, a figure that was about one-fourth of expectations. The unemployment rate rose to 8.6% as more people . While fulltime employment continues to trend downward it is being offset by gains in part time work.
CAN - Trade Deficit Widens in May
A second release from Canada showed the trade deficit there widening to 1.4 billion Canadian dollars as exports fell 6.9% and imports were down 3.5%. Weaker trade will hurt economic growth in Canada as that is usually a strong sector for growth.
USD/CAD - Loonie Trades With Recent Range
The US Dollar-Canadian Dollar rose overnight, but the greenback’s rise stalled at the 1.1675 area the falling short of Wednesday’s peak. The pair, though hitting a 7-week high at 1.1725 this week, otherwise showed sideways trading. As long as stocks and commodities, as well as the outlook for the global economic recovery remain weak, the US Dollar should be expected to gain against its Canadian counterpart.
Next Week's Key Releases
Next week will bring inflation data from the UK, US, the Euro-zone, and Canada. Other important releases include US retail sales, Germany’s ZEW Economic sentiment index, and UK employment data.
