• USD: Lower, durable goods beat forecast, new home sales decline, OECD raises its economic forecast
  • JPY: Lower, pressured by a rebound in global equity markets and improving risk appetite
  • EUR: Lower, pressured by spillover from SNB intervention to weaken the CHF
  • GBP: Higher, OECD says UK economy will stabilize in 2010,King says weak GBP makes UK competitive
  • CAD and AUD: AUD & CAD higher, supported by OECD upgrade of its global economic outlook

Overview

USD traded mixed in pre FOMC trade rebounding from multiday lows against the EUR and CHF.USD was supported by rumors that the SNB intervened to weaken the CHF. The BIS bought EUR on behalf of the Swiss central bank. SNB officials would neither confirm nor deny the report of intervention. CHF declined 2% versus the USD after the SNB intervention and EUR/CHF cross rallied above 1.5200. Prior to the SNB intervention the USD was trading sharply lower pressured by report that the OECD upgraded its global economic outlook. The OECD expects global growth to rise 0.7% in 2010 compared to its March forecast of 0.1% rise. The OECD upgrade boosted risk appetite and demand for commodity currencies. JPY traded mixed with modest support from comments by the BOJ’s Nakamura that Japans Q2 GDP was likely positive. GBP traded higher supported in cross trade to the EUR post SNB intervention and by rising UK bank stocks. GBP gains were limited by comments form the BOE’s King. King said that weak GBP will make the UK more competitive and that he has genuine concerns about how quickly the UK economy can recover. The trade showed limited reaction to report that Moody’s says that there is no alternative to the USD as the global reserve currency and USD AAA debt rating is secure. USD traded lower after the release of better than forecast May durable goods. The durable goods report fuels hope that the US economy is nearing a bottom and helped to boost risk appetite. Good news for the US and global economy is seen as negative for the USD because the economic data supports risk appetite and reduces safe haven demand for the USD. An unexpected decline in US May new home sales had little impact on the USD as US equity markets extend early gains. The EUR and CHF failed to benefit from today's rebound in US equities. It's not clear if today's EUR and CHF price action reflects a breakdown in the correlation between equity prices and FX or lingering impact of today's SNB intervention. We suspect the latter to be the case. The trade awaits today's FOMC rate decision and policy statement due for release at 1.15 CST. The Fed is expected to hold rate policy unchanged, try to talk down rates and maintain the current level of its bond purchases.

Today’s US data:

US May durable goods rose 1.8%, a -0.6% decline was expected. May new home sales unexpectedly declined 0.6% to 342k units, the trade was looking for a rise to 360k units for the new home sales report.

Upcoming US data:

On June 25 th initial jobless claims for week ending 6/20 will be released expected at 600K compared to 608K last week. Also on June 25th Q1 final GDP will be released expected unchanged at -5.7 %. On June 26 th May personal income and consumption will be released expected 0.4% and 0.2% respectively. June University of Michigan consumer sentiment will also be released on May 26th expected unchanged at 69.