Dollar Testing Support as Stocks Rally

* The dollar and yen fell on Friday as stronger European purchasing managers’ indexes and a jump in US existing home sales boosted risk appetite. Federal Reserve Chairman Ben Bernanke said “economic activity appears to be leveling out, both in the United States and abroad, and the prospects for a return to growth in the near term appear good.” However, he did not give any indications of any tightening moves. The S&P 500 rose 18.76 points to 1,026.13. The yen was pressured by rising equity markets. The euro advanced as European stocks rose to a 10-month high and the eurozone manufacturing and services PMI climbed more than expected. Sterling fell modestly on the UK’s economic fundamentals despite better risk sentiment. The Australian and Canadian dollars gained on the stronger global economic outlook. Commodity prices rose and oil prices reached a 2009 high.

* The dollar index fell for a fourth day. Highly correlated with risk aversion and equity markets, the index failed to break the downtrend earlier in the week when global stock markets were under pressure. The dollar peaked when equities bottomed in March. US stocks are on the verge of breaking resistance while the dollar index is at important support. If the stock market continues its ascent next week, the dollar index is likely to test the 76- handle support.



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Financial and Economic News and Comments

US & Canada

* US existing home sales in July jumped a more-than-expected 7.2% m/m, the largest month-on-month percentage gain since records began in 1999, to a seasonally adjusted 5.24 million annual rate, the highest level since August 2007, after a 3.6% m/m increase to 4.89 million in June, figures from the National Association of Realtors showed, indicating the US housing market is stabilizing. July existing home sales advanced 5.0% y/y. Sales rose for both single-family units and condos/co-ops. The median price for an existing home declined to $178,400 in July, down 15.1% y/y. Inventories of existing home sales increased 7.3% at the end of July to 4.09 million available for sale, representing a 9.4-month supply at the current sales pace following June’s 9.4. Regionally, July existing home sales gained 13.4% m/m in the Northeast, 10.9% m/m in the Midwest and 7.1% m/m in the South, while sales in the West declined 1.7% m/m.

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* Michigan remained the state with the highest unemployment rate, declining to 15.0% in July from 15.2% in June, the Labor Department reported. The states with the next highest jobless rates in July were the following: Rhode Island, 12.7%; Nevada, 12.5%; California and Oregon, 11.9% each; South Carolina, 11.8%; Ohio, 11.2%; Kentucky and North Carolina, 11.0% each; Florida and Tennessee, 10.7% each, District of Columbia and Indiana, 10.6% each; Illinois, 10.4%; and Georgia, 10.3%. New York’s unemployment rate declined to 8.6% in July from 8.7% in June, while New York City’s rate rose to 9.6%, the highest since June 1997, from June’s 9.4%. North Dakota had the lowest unemployment rate, 4.2% in July.

Europe

* The eurozone manufacturing PMI advanced slightly more than forecast to 47.9 in August from 46.3 in July, indicating the eurozone manufacturing sector contracted at the slowest rate in 14 months, while the services PMI climbed more than expected to 49.5 from July’s 45.7, indicating the eurozone services sector declined at the slowest pace in 15 months, preliminary August PMI data from Markit Economics showed. The composite PMI rose to a 15-month-high 50.0 this month from 47.0 in July, showing overall expansion for both industries and ending a 14-month string of readings below 50.

* The German manufacturing PMI increased more than expected to 49.0 in August from 45.7 in July, indicating the manufacturing sector in Germany declined at its slowest pace in a year, while the services PMI rose more than anticipated to a 16-month-high 54.1 from July’s 48.1, showing an expansion in the German services sector, according to preliminary August PMI data by Markit Economics. The composite PMI for both sectors jumped to a 15-month-high 54.2 this month from 49.0 in July, indicating overall expansion.

Asia-Pacific

* Australia's largest lender Westpac Banking Corp. said its cash earnings for the three months to June 30 were approximately A$1.1 billion ($914 million), in line with a year earlier. Total lending for its third quarter was up 1.3% q/q with “particularly good growth” in domestic mortgages, while deposits rose 2.3% q/q. Impairment charges increased to A$865 million from the previous quarter’s A$811 million.

FX Strategy Update



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Источник: Hans Nilsson

21.08.2009