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Video for July 15th, 2008 (5 min): Euro Sets Fresh Record High vs Dollar, But Pares Those Gains in NY Trading

UK Consumer Prices Jump to 3.8% Annual Pace

In the UK, consumer inflation jumped to an annual pace of 3.8% in June, up from 3.3% in May. This figure was above expectations and is the fastest annual pace in 11 years. It will keep the pressure on the Bank of England to keep rates at their current levels even as the economy is lurching towards a recession.

UK BRC Retail Sales Negative in June, RICS House Price Balance at -88% 

'The BRC retail sales monitor showed sales falling 0.4% in June compared to last year. Consumers are becoming more price-conscious and are spending less. In a separate report, the RICS house price balance showed that 88% of surveyors and realtors saw falling house prices in June, a slight improvement.

EUR & GER ZEW Economic Sentiment Hits Record Low

In Germany, the ZEW Economic sentiment index, which measures the outlook over the next 6 months, fell to a record low of -63.9. In the Euro-zone as a whole the figure was -63.7. This is a sharp fall from May as business sentiments were dampened by a combination of surging oil prices, the strong Euro, a rate hike by the ECB and financial market turmoil.

EUR/GBP - Pound Gains on CPI Data

 

The Euro-Pound pair fell in favor of the Pound following the releases. It's the second straight session that the pair fell as the economic pressures facing the Euro-zone are becoming clearer.  The Pound also hit a 3 ½ month high against the Dollar.

EUR/JPY - Euro Sinks vs Yen as European Stocks Suffer

 

Stocks in Europe took a pounding, with the main indexes in London, Frankfurt and Paris down between 2 and 2.5%. The poor performance in equities increased risk aversion and boosted the Yen. The Euro-Yen pair plunged 220 pips during the session, finding support near 166.50.

US Retail Sales Only Gain 0.1%, Boost From Rebates Over

In the US, retail sales disappointed, showing a 0.1% gain in June. It seems that the boost from the stimulus checks that had propped up the numbers recently has now faded. Excluding autos, sales were up 0.8%.

US Producer Prices Surge 1.8% in June

Inflation to producers jumped by 1.8% in June, higher than expected, mostly on the back of higher food and energy costs. Core prices were up only 0.2%.

US Empire Index Still Negative, Business Inventories Rise 0.3%

In other releases, the Empire State Manufacturing Survey showed that manufacturing activity in New York State worsened for a third consecutive month in July. The index increased slightly from last month's level but, at -4.9, remained below zero. Business inventories were up 0.3%, smaller than expected, as firms cutback on stockpiles with lean economic activity ahead.

EUR/USD - Euro Sets a New All Time High, But Retreats in NY Trading

 

The Euro-Dollar pair hit a new record high during European trading, climbing above 1.60, in anticipation of testimony by Fed Chairman Bernanke.  Contrary to expectations, he mainly focused on inflation though he acknowledged the downside risks to growth. In NY trading, the Dollar recovered its overnight losses, as the all time high served as strong resistance.

USD/JPY - Dollar Plunges vs. Yen on Risk Aversion and Weak Start to Stocks

 

The US stock market fell steeply at its open and during Bernanke's testimony. The Dollar-Yen, already pressured overnight, hit a 1-month low near 104.15 a slide of 200 pips from the session's open. Stocks recovered though, as oil prices fell as much as $9 at one point. This helped stop the bleeding in the pair, though the Dollar did not manage a recovery like it did against the Euro.

CAN Bank of Canada Holds Rates at 3%

The Bank of Canada held rates at 3%. The three major developments affecting the Canadian economy are the protracted weakness in the U.S. economy, ongoing turbulence in global financial markets, and sharp increases in many commodity prices. The statement was rather balanced with members believing the current rate is "appropriate."

USD/CAD - Loonie Reaches Parity vs Greenback Prior to BOC Decision

 

The US Dollar-Canadian Dollar pair reached parity prior to the NY open, the first time that's happened since June 3^rd. The last 5 sessions have seen the pair drop from the 1.02 level. The greenback found some support near 0.9980 in NY trading following the announcement. 

NZ CPI Increases to 1.6% in 2nd Quarter

In New Zealand last night, data showed consumer prices increasing 1.6% in the 2^nd quarter, with the annual rate climbing to 4%.

NZD/USD - Kiwi Jumps to New 1 1/2 Month High on CPI Data

 

As a result the Kiwi-US dollar pair jumped 120 pips overnight, hitting a new high at 0.7760. The Kiwi is expected to continue its interest rate advantage over the US Dollar as the bank is willing to have growth deteriorate as long as higher rates bring down inflation.

Upcoming Releases

Turning to upcoming releases, overnight the UK will post employment data, and Germany and the Euro-zone post revised CPI data for June. Switzerland meanwhile releases figures on retail sales.

Tomorrow, the US has a full docket with CPI data, industrial production, FOMC minutes, and international capital flows. Canada posts figures on manufacturing shipments.