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Forex Daily Overview

USD locked in tight range trade, pares gains as stocks rise

Mon, Jun 29 2009, 16:28 GMT
by Michael J. Malpede

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• USD: Mixed, China plans no sudden changes in reserve policy, BIS warns of long economic stagnation
  
• JPY: Lower, political uncertainty, calls for Japan's PM to resign, retail sales flat, industrial production rises
  
• EUR: Mixed, business climate and economic sentiment improve, ECB policy uncertainty
  
• CHF: Lower, pressured by threat of SNB intervention, CPI due for release Friday
  
• GBP: Higher, despite report of falling home prices and S&P warning that UK debt could rise to 200% of GDP
  
• CAD and AUD: AUD & CAD lower, RBA rate cut speculation, China may stop buying metals for reserves
  

Overview

USD traded mixed Monday supported by China's reserve comments and BIS global outlook. Friday the USD was pressured by China's call for the establishment of a super world reserve currency. Monday, the PBOC’s Zhou said that China plans no sudden changes in its reserve policy. Zhou’s reserve comments sparked light demand for the USD. China continues to send mixed signals about USD reserve status and China's plans for US holdings. The BIS warned that the stimulus plans might spark a temporary pickup in growth then fail. According to the BIS we could be heading for a long period of stagnation and the return to normal market conditions will be protracted. The BIS also said the recovery is frail but exit form fiscal and monetary stimulus must be timely. The BIS forecast sparked light safe haven demand for the USD.EUR drifted lower despite report of improving business and economic sentiment. GBP traded higher and shrugged off reports of falling UK home prices and S&P warning that UK debt could rise to 200% of GDP. Commodity currencies drifted lower with the AUD pressured by RBA rate speculation and CAD pressured by report that China may stop buying metals for its strategic reserves. Rising crude prices had limited impact on today's FX trade. This week's main focus will be the release of US unemployment for June and ECB policy meeting Thursday. US unemployment is expected to rise but at a slower pace. ECB officials have indicated that current monetary policy is appropriate and no change is expected from the ECB at Thursday's meeting.

Today’s US data:

No major US economic data was scheduled for release Monday.

Upcoming US data:

This week's US economic calendar includes the June 30th release of April Case Shiller home price index expected at -18.5 compared to -18.7 last month. Also on June 30th June Chicago PMI and consumer confidence will be released. The Chicago PMI is expected to improve to 38.3 from 34.9 last month. Consumer confidence is expected to improve to 57 from 54.9 last month. On July 1st May Construction spending, June ISM manufacturing index and May Pending Home Sales Index will be released. Construction spending is expected to fall 0.5% compared to a 0.8% rise last month. The ISM manufacturing index is expected to improve to 44 from 42.8 in May. Pending home sales are expected to rise to 92.5 from 90.3 last month. On July 2nd initial jobless claims for the week ending 6/26 will rereleased expected at 610k compared to 627k last week. On July 2nd June nonfarm payrolls and unemployment will be released. The nonfarm payrolls are expected at -368 k from -345k and the unemployment rate is expected to rise to 9.6% from 9.4% last month. May factory orders will also be released on July 2 nd expected to rise 0.1%.

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Published on  Mon, Jun 29 2009, 16:31 GMT

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