• USD: Higher, jobless claims decline sparks risk demand, existing home sales drop sparks risk aversion
  • JPY: Higher, supported by repatriation flows and Yuan revaluation speculation, exports fall 36% y/y
  • EUR: Lower, German IFO business sentiment rises at a slower pace, Fed not prepared to withdraw stimulus
  • GBP: Lower, BOE's King says weak GBP will help rebalance UK economy
  • CAD and AUD: AUD & CAD lower, Australian home sales rise, BOC concern about CAD strength

Overview

USD and GBP opened lower Thursday. USD was pressured by the FOMC policy statement which says that the Fed will keep interest rates low for an extended period. The Fed sees the US economy improving but not enough to withdraw stimulus. GBP was pressured by dovish comments from the BOE Governor King that a weak GBP will help to rebalance the UK economy and that weaker GBP was helping to cushion UK economic downturn. USD downside was limited by report of an unexpected decline in US August existing home sales. JPY traded higher supported by repatriation flows in front of Japan's fiscal half-year end on September 30th and a report that G-20 officials may increase pressure on China to revalue the Yuan to help reduce global trade imbalances. EUR opened higher and rallied to a five month high versus the GBP.EUR gains were limited by report of below expectation German IFO business confidence and a statement from an IFO official that it's not clear if the EU recovery is self sustainable. EUR/CHF cross traded at a three-month low. The weakness in the EUR/CHF increases the risk of SNB intervention. Commodity currencies were mixed rallying in early trade despite weaker crude prices with AUD supported by report of strong Australian home sales. CAD gains were limited by a statement from the BOC warning that strong CAD puts the Canadian recovery at risk. AUD turned lower tracking weaker US equities. US economic data was mixed with jobless claims falling to their lowest level since the week ending July 11th and existing home sales posting an unexpected decline in August. USD turned higher for the day after the release of the unexpected fall in August existing home sales. Stocks dropped in reaction to the home sales report. USD was also supported by report that the Fed may reduce the TSLF facility. Focus turns to the G- 20 meeting. The G-20 meeting will be held on September 24th and 25th.The G-20 meeting may spark selling of the USD if the G-20 suggests that exchange rates will need to be adjusted to help correct global trade imbalances.

Today’s US data:

A weekly jobless claim for week ending 9/19 declined by 21k to 530k, a decline of 540k was expected. Existing home sales for August dropped by 2.7% to 5.10mln units, a rise to 5.30mln units was expected. USD rebounded after the release the existing home sales report as stocks erase early gains.

Upcoming US data:

On September 25th August durable goods will be released expected at 1.1% compared to 5.1% last month along with final University of Michigan sentiment for expected unchanged at 70.2. August new home sales will also be released on September 25th expected 450k compared to 433k last month.