Currency Updates:
U.S. Dollar Trading (US) disappointing economic growth from the Eurozone saw weakness flow through across global markets with stocks pulling back in Europe and US. US July Housing Starts fell -1.5% m/m and July Industrial Production gained 0.9% vs. 0.5% forecast. In US stocks on Friday, DJIA -76 points closing at 11405, S& P -11 points closing at 1192 and NASDAQ -31 points closing at 2523. Looking ahead, July PPI forecast at 1.6% vs. 1.8% previously.
The Euro (EUR) the market was heavy in early Europe with Q2 GDP disappointing in both Germany and the Eurozone as a whole. EU Q2 GDP at 0.2% vs. 0.3% forecast. The market found support in the Merkal-Sarkozy press conference but the gains did sustain into the close with the lack of Eurozone Bond support seeing the crisis continue. Looking ahead, June Current Account previously at -5.2bn. July Inflation forecast at -0.6% vs. 0% previously m/m.
The Japanese Yen (JPY) USD/JPY moved cautiously with little interest to break out of the recent range. Crosses were mixed with AUD/JPY falling with stocks whilst GBP/JPY pushed higher with the stronger UK CPI. Stock market movements will continue to direct the safe haven currency for the rest of the week.
The Sterling (GBP) outperformed and was the strongest currency in the market with UK CPI at 4.4% y/y and the Governor King suggesting 5.0% in the medium term was forecasted. The BOE has a mandate to fight inflation targeting 2-3%. There is little suggestion the BOE will raise rates soon however with the UK economy still struggling. Looking ahead, BOE Minutes forecast at 7-2-0.
The Australian Dollar (AUD) lows in the Europeans session were reversed in the US even as stocks fell with the Aussie rallying with the Euro spike post Sarkozy-Merkal. The relief rally is under threat with 1.0500 resistance holding so far and the market will be looking to Eurozone sentiment for the next direction.
Oil & Gold (XAU) Gold remained supported as an alternative to both the Euro and the USD. $1800 is the target for the bulls in the short term. Crude Oil remained supported on dips to close above $87 a barrel.
