Currency Updates:
U.S. Dollar Trading (USD) the mood darkened as the day went on yesterday with light selling in Asia turning into a major selloff by the end of the US session. The main factors were the FED downgrading US growth combined with China manufacturing PMI survey showing contraction and 15 global banks downgraded by Moody’s. The US economic data was mixed with weekly jobless claims at 386k vs. 383k. May Existing Home Sales at -1.5% vs. 1.1% forecast. Looking ahead, no economic data tonight from the US.
The Euro (EUR) the rally found strong resistance at 1.2700 and reversed sharply when negative news emerged concerning the possible delay of ESM ratification in Germany. Spanish bond yields did drop however and this is a silver lining but the EUR/USD tumbled to 1.2550 and is looking fragile as we going into Asian Friday trade.
The Japanese Yen (JPY) USD strength played out on the USD/JPY pair with a break of the major Y80 level overnight. The subsequent rally to Y80.35 before consolidating was a surprise from the usual correlation with EUR/JPY and may suggest a new period of USD strength on the horizon. EUR/JPY losses were tempered by the USD/JPY move and the pair is holding above Y100 near Y100.50.
The Sterling (GBP) good EUR/GBP selling once again saved the GBP/USD from part of the large falls overnight but we did pull back from day highs at 1.5725 to below 1.5600 in the US session. Strong UK May Retail sales at 1.4% vs. 1.0% helped GBP outperform against most risk currencies. The catalyst for heavy selling later was rumors of downgrade of most UK banks by Moody’s. Looking ahead, German June IFO forecast at 106.1 vs. 106.9 previously. Also ahead, EU Finance Ministers meet.
Australian Dollar (AUD) the AUD/USD mimicked the EUR/USD closely with a rally in early Europe before sustained selling for the rest of the day as the China slowdown story hit the Asian commodity powerhouse directly. June Chinese Flash HSBC PMI came in lower at 48.1 vs. 48.4 previously.
Oil & Gold (XAU) Gold was hammered lower by the combination of no new US stimulus and the growing optimism a solution for the European debt crisis may be found. OIL/USD broke below $80 and fell to $78 before the extremely oversold conditions capped any further downside.
