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Greenback Little Changed Despite Weak Data

Thu, Jul 31 2008, 23:05 GMT
by Hans Nilsson

CMS Forex

Greenback Little Changed Despite Weak Data

• The dollar was little changed after an initial drop as reports showed the US economy grew less than forecast in Q2 and initial jobless claims rose last week to a 5-year high. The yen and Swiss franc were modestly higher as US stocks fell. The USD/CAD was little changed, unable to penetrate the 1.03 resistance for a third day. The GBP/USD rose modestly. The AUD/USD fell after Australian retail sales fell the most in six years.


• The EUR/USD initially gained on weaker-than-expected US data. However, the pair later pared gains as oil prices fell and the Chicago PMI rose above the 50-line. The pair is testing the 1.56 resistance ahead of Friday’s US employment report.

Financial and Economic News and Comments

US & Canada

• The US gross domestic product rose at a slower-than-expected 1.9% q/q annual rate in Q2 2008, the Commerce Department said in its first estimate of Q2 GDP. The strongest component of real GDP was net exports, which added 2.4 points to the real GDP growth rate, the most in any quarter since 1980. Businesses drew down inventories sharply; inventories subtracted 1.9 points from growth, the second largest decline in history. The decline in inventories may suggest smaller cuts in production down the road. Private consumption rose 1.5% q/q at an annual rate after increasing 0.9%. Consumer spending contributed 1.08 percentage points to GDP after contributing 0.61 percentage points. Real GDP rose 1.8% y/y. GDP growth in Q1 was revised down to a 0.9% rate of increase, compared to a previously reported 1.0% rate of increase.


• The GDP price index rose at a 1.1% q/q at an annual rate in Q2, up 2.0% y/y. The key price index for personal consumption expenditures rose 4.2% in Q2 after increasing 3.6% in Q1. The PCE price gauge excluding food and energy grew 2.1% after increasing 2.3%.


• US jobless initial claims jumped 44,000 in the week ended July 26 to 448,000 to a 5-year high, the Labor Department said. The data are typically volatile at this time of the year due to auto plant re-tooling and the Labor Department said many extra workers re-applied for benefits due to the recently enacted extension of jobless benefits, so the data are not directly comparable to previous periods. Still, the trend is moving higher, indicating a weakening labor market. Continuing claims rose 185,000 to 3,282,000, the highest level since December 2003.


• Chicago PMI rose to a slightly less-than-expected 50.8 in July from 49.6 in June, showing an expansion of manufacturing activity in that key region, to the highest level in six months.

Europe

• Eurozone inflation rate rose to 4.1% y/y in July, the highest since April 1992, from 4.0% y/y in June, the Eurostat said.


• GfK confidence index fell 5 points to -39, the lowest since the data began in 1974, GfK NOP Ltd. said.


• The average price of a UK home fell 8.1% y/y, the biggest decline since at least 1991, Nationwide Building Society said.

Asia-Pacific

• The Australian trade balance unexpectedly turned to a surplus in June after coal and meat exports jumped. The surplus was A$411 million ($387 million) in June, compared with a revised deficit of A$253 million in May.


• Australia’s retail sales fell 1.0% m/m in June, the most in six years, after increasing 0.9% m/m in May, the Australian Bureau of Statistics said.

FX Strategy Update

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Published on  Thu, Jul 31 2008, 23:10 GMT