USD Holds Support as Consumer Confidence Declines

* The dollar index found support at the key 78 area and reversed earlier losses after US consumer confidence declined more than expected. However, there were also US economic recovery signs. The S&P Case-Shiller home-price indexes for May posted their first monthly gains in nearly three years. Federal Reserve Bank of San Francisco President Janet Yellen said the US economy is showing the “first solid signs” of emerging from the recession and should resume growth later this year. The S&P 500 declined 2.56 points to 979.62. The yen rose as risk aversion increased on the stock market correction. The euro fell after being unable to push through the 1.43 resistance. Sterling declined on reduced risk appetite. The Canadian dollar fell as energy prices plunged.

* The AUD/USD broke the important 0.83 resistance after the Reserve Bank of Australia said the Australian economy may rebound faster than earlier forecast. Investors speculated that the RBA may increase interest rates after RBA Governor Glenn Stevens said: “We can much more easily imagine upside risks to the outlook, to balance out the downside ones, than was the case six month ago.” However, the pair pared gains and traded below 0.83 as risk appetite subsided on weakening US consumer confidence. There is support in the 0.80 area.

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Financial and Economic News and Comments

US & Canada

* Home prices in 20 major US cities increased 0.5% m/m in May, the first gain after 34 consecutive months of declines, according to the S&P/Case-Shiller composite-20 house price index. House price increases were strongest in Cleveland, up 4.1% m/m; Dallas, up 1.9% m/m; and Boston, up 1.6% m/m. May home prices fell 17.06% y/y, less than expected.

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* The Conference Board US consumer sentiment index fell more than expected to 46.6 in July, a second straight fall, from 49.3 in June, data from the Conference Board showed. The present situation index declined to 23.4 from June’s 25.0 amid a worsening job market. The consumer expectations index slid to 62.0 from 65.5 on consumer pessimism about jobs and income prospects.

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* Manufacturing activity in the central Atlantic region rose at a faster rate in July, with the Richmond Fed manufacturing index climbing more than expected to 14 from June’s 6, the latest survey by the Federal Reserve Bank of Richmond showed. Among the index's key components, shipments jumped to 16 in July from 2 in June, new orders rose to 24 from 16, and the jobs index increased to -5 from -6.

Europe

* UK retailers saw a further decline in retail sales in July, according to the Confederation of British Industry’s latest distributive trades survey. The result showed 32% of respondents said sales volumes increased compared to July 2008, while 47% said they fell, for a balance of -15 following June’s -17. Survey respondents predicted a heavier decline in August, for a balance of -23.

* The average price of a home in England and Wales was up 0.1% m/m in June, the first increase since January 2008, to £153,046 ($253,000), the Land Registry said. House prices in London increased 2.0% m/m.

Asia-Pacific

* The Conference Board Australian leading economic index declined 0.1% in May to stand at 113.0 after a revised 0.3% increase in April and a revised 0.5% increase in March, the Conference Board reported. The positive contributors to the May LEI were money supply, yield spread, the sales to inventories ratio, gross operating surplus, and share prices. Building approvals and rural goods exports fell in May. Despite the May LEI decline, the 6-month decrease in the LEI has eased. The coincident economic index climbed 0.3% to stand at 112.4 in May after remaining unchanged in April and declining 0.2% in March.

* The NAB Australian business confidence index rose to -4 in Q2 2009 from -24 in Q1, indicating business confidence in Australia jumped to its highest level since the beginning of the global economic crisis. The business conditions index improved to -9 from Q1’s -20.

Источник: Hans Nilsson

28.07.2009