Risk appetites remained firm and the USD stayed soft as US housing data pointed to increasing signs that the US housing market continued to stabilize, leading stock markets to probe mildly higher. The NY day got off to a shaky start, however, as June personal income fell more than expected (-1.3% vs. exp. -1.0%), while personal spending rose slightly more than forecast (+0.4% vs. exp. +0.3%). But June pending home sales, a leading indicator for existing home sales, later surprised with a strong 3.6% gain (forecast +0.6%), marking the fifth straight month of improvement in that series. The USD turned lower and the JPY-crosses rebounded from losses during London as stocks stabilized and eventually moved into positive territory.
On the whole, though, the day was spent consolidating after two days of strong gains in risky assets. Oil traded in a narrow range, while stocks waffled about either side of flat before posting small gains at the close. Gold prices made a late afternoon surge and tested to recent highs at $970/oz, before settling back at around $967/oz. USD/JPY recovered all the ground it lost in overnight trading, bouncing back from around 94.40 to a high near 95.40, before closing back near 95.20. EUR/USD consolidated in a fairly narrow range between roughly 1.4370 and 1.4430, importantly holding above yesterday's key break level at 1.4330/40. USD/CAD got a bit of a surprise in the afternoon when Canadian Fin. Min. Flaherty hinted that the government may take steps to rein in CAD strength. The Loonie dropped as USD/CAD moved from around 1.0690 to a high near 1.0760, before dropping back to 1.0720.
Going into Asia, it looks like risk remains 'on' until markets see some news to think otherwise. Data is light in Asia, but UK consumer confidence will be an important test to see if Cable can keep the rally going.
