Market Review - 27/08/2015 22:41GMT
Dollar continues this week's winning streak on upbeat U.S. data and rally in the Dow
The greenback strengthened further versus other major currencies on Thursday as release of a string of upbeat U.S. economic reports boosted optimism over the strength of the economy.
On Thursday, the U.S. Commerce Department showed in its second GDP estimate that U.S. GDP expanded at a 3.7% annual pace instead of the 2.3% rate reported last month, whilst personal consumption rose 3.1% in the second quarter, meeting expectations and up from an initial estimate of 2.9%. Meanwhile, the Labor Department said initial claims for state unemployment benefits slipped 6,000 to a seasonally adjusted 271,000 for the week ended Aug. 22, which was the first decline since July 18. (claims for the prior week were unrevised).
In a separate report, the National Association of Realtors showed contracts to buy previously owned U.S. homes rose less than expected in July, but continued to suggest upward momentum in the housing market recovery. Pending Home Sales Index, based on contracts signed last month, increased 0.5 percent to 110.9.
Versus the Japanese yen, although U.S. dollar came under selling pressure after meeting renewed selling at 120.23 ahead of Asian open on Thursday and then dropped to 119.80 at European open, renewed broad-based buying in the greenback lifted price from there and the pair later rose to 120.55 and then another session high of 121.40 in New York session following the release of upbeat U.S. economic reports as mentioned above.
Euro fell for another day on Thursday. Although the single currency edged higher from previous session low of 1.1292 in Asia and then climbed to 1.1365 at European open, renewed selling interest emerged there and knocked price down to 1.1276 in European midday. Later, euro fell to as low as 1.1203 in New York trading before recovering.
Reuters news reported comments from ECB Board member Benoit Coeure. He said 'monetary policy can support growth but it cannot create it in a lasting way; effectiveness and legitimacy of euro area governance will not be increased by placing excessive demands on the central bank; vital in the short term that the banking union be finalized; at the moment, however, there is no such confidence in Europe's ability to fully reap the economic benefits of our monetary union and ensure stability and growth in the euro area; we must be clear, however: the euro area is an irreversible project, not simply a fixed exchange rate system; exit of a member country would inevitably lead economic actors to wonder who would be next, with all the potential destabilising effects that such speculation could entail.'
The British pound ratcheted lower after meeting renewed selling at 1.5509 in Asia and then fell below Wednesday's New York support at 1.5453 to a fresh 7-week trough at 1.570 in New York trading before recovering on short-covering.
In other news, Esther George , Federal Reserve Bank of Kansas City President said on CNBC - Fed policy has influence on volatility, '"this week's events complicate the rate picture"; normalization process needs to begin; rate hike could bring volatility to market; disinflationary pressures will likely continue for some time but they are likely transitory.' Later, he added 'need to wait and see whether U.S. economy is strong enough for fed to raise rates -fox business network; doesn't want to overreact to short-term data that may not be significant in long-term for Fed rate decision; rate hike is "on the table" at every upcoming Fed meeting in her opinion; disinflationary impact of oil price shock, stronger dollar should be temporary, doesn't shift longer-term inflation forecast.'
Data to be released on Friday:
UK Gfk consumer confidence, Japan all household spending, CPI, retail sales, Switzerland GDP, France producer prices, Italy business confidence, consumer confidence, U.K. GDP (second release), Italy wage inflation, euro zone business climate, consumer inflation expectation, economic sentiment, industrial sentiment, Germany CPI, HICP, Canada producer prices, and U.S. consumption, PCE, personal income, personal consumption, and University of Michigan consumer confidence.
Dollar continues this week's winning streak on upbeat U.S. data and rally in the Dow
The greenback strengthened further versus other major currencies on Thursday as release of a string of upbeat U.S. economic reports boosted optimism over the strength of the economy.
On Thursday, the U.S. Commerce Department showed in its second GDP estimate that U.S. GDP expanded at a 3.7% annual pace instead of the 2.3% rate reported last month, whilst personal consumption rose 3.1% in the second quarter, meeting expectations and up from an initial estimate of 2.9%. Meanwhile, the Labor Department said initial claims for state unemployment benefits slipped 6,000 to a seasonally adjusted 271,000 for the week ended Aug. 22, which was the first decline since July 18. (claims for the prior week were unrevised).
In a separate report, the National Association of Realtors showed contracts to buy previously owned U.S. homes rose less than expected in July, but continued to suggest upward momentum in the housing market recovery. Pending Home Sales Index, based on contracts signed last month, increased 0.5 percent to 110.9.
Versus the Japanese yen, although U.S. dollar came under selling pressure after meeting renewed selling at 120.23 ahead of Asian open on Thursday and then dropped to 119.80 at European open, renewed broad-based buying in the greenback lifted price from there and the pair later rose to 120.55 and then another session high of 121.40 in New York session following the release of upbeat U.S. economic reports as mentioned above.
Euro fell for another day on Thursday. Although the single currency edged higher from previous session low of 1.1292 in Asia and then climbed to 1.1365 at European open, renewed selling interest emerged there and knocked price down to 1.1276 in European midday. Later, euro fell to as low as 1.1203 in New York trading before recovering.
Reuters news reported comments from ECB Board member Benoit Coeure. He said 'monetary policy can support growth but it cannot create it in a lasting way; effectiveness and legitimacy of euro area governance will not be increased by placing excessive demands on the central bank; vital in the short term that the banking union be finalized; at the moment, however, there is no such confidence in Europe's ability to fully reap the economic benefits of our monetary union and ensure stability and growth in the euro area; we must be clear, however: the euro area is an irreversible project, not simply a fixed exchange rate system; exit of a member country would inevitably lead economic actors to wonder who would be next, with all the potential destabilising effects that such speculation could entail.'
The British pound ratcheted lower after meeting renewed selling at 1.5509 in Asia and then fell below Wednesday's New York support at 1.5453 to a fresh 7-week trough at 1.570 in New York trading before recovering on short-covering.
In other news, Esther George , Federal Reserve Bank of Kansas City President said on CNBC - Fed policy has influence on volatility, '"this week's events complicate the rate picture"; normalization process needs to begin; rate hike could bring volatility to market; disinflationary pressures will likely continue for some time but they are likely transitory.' Later, he added 'need to wait and see whether U.S. economy is strong enough for fed to raise rates -fox business network; doesn't want to overreact to short-term data that may not be significant in long-term for Fed rate decision; rate hike is "on the table" at every upcoming Fed meeting in her opinion; disinflationary impact of oil price shock, stronger dollar should be temporary, doesn't shift longer-term inflation forecast.'
Data to be released on Friday:
UK Gfk consumer confidence, Japan all household spending, CPI, retail sales, Switzerland GDP, France producer prices, Italy business confidence, consumer confidence, U.K. GDP (second release), Italy wage inflation, euro zone business climate, consumer inflation expectation, economic sentiment, industrial sentiment, Germany CPI, HICP, Canada producer prices, and U.S. consumption, PCE, personal income, personal consumption, and University of Michigan consumer confidence.
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