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Video for August 12th, 2008 (5 min): Markets Take A Breather Following Rapid Gains for Greenback Last Week JPN Corporate Service Price Index Shoots Up to 27-Year High of 7.1% in July In Japan last evening, it was reported that annual inflation at the wholesale level accelerated to a 27-year high of 7.1% in July. That is a big jump from the 5.6% increase seen in June, and overshot expectations. This index measures the price that companies pay to procure goods for production. JPN Household Confidence Slips Again, Lowest Level Since 1982 Japanese household confidence fell yet again in July to the lowest level since records began in June of 1982, declining to 31.4 from 32.6 in June. Higher prices for energy and food, a weakening labor market, and slower economic growth are all weighing down Japanese moods and tightening spending habits. JPN Industrial Production Revised Downward for June A last piece of poor data from Japan showed that the final version of industrial production in June fell 2.2%, a weaker number than the preliminary release. AUS NAB Business Conditions and Confidence Down in July The National Australian Bank (NAB) Survey of business conditions slumped again in July, falling 5 points to -5. That continues a clear downtrend in conditions since January. Meanwhile the business confidence index remained anemic at a -9. AUD/USD - Aussie Continues Falling vs Greenback
The poor fundamentals have caused the RBA to take a dovish stance and has pressured the Aussie in the last couple of weeks. The Aussie slid against the US Dollar for an 11th straight session, testing 0.87. That's the longest losing streak since 1975. UK DCLG House Price Index Deteriorating The Department for Communities and Local Government said today that its housing price index (HPI) showed prices in June to be 0.6% higher compared to June last year. That's a drop off from May's downwardly revised 3.0%. Last week, the HBOS saw its index decline 8.8% on the year, the largest fall in almost a quarter century.
UK Consumer Prices Surge to 4.4% Annual Rate in July
Consumer prices meanwhile continued climbing, rising to 4.4% on an annual basis, the highest pace since comparable records began in 1997, and was higher than expected. Core prices were up 1.9%, and was flat on the month. UK BRC Retail Sales Decline 0.9% in July Compared to Year Ago With consumers facing higher prices, the BRC retail sales monitor showed sales falling 0.9% compared to a year ago. The UK economy is battered by the housing sector, which is now spreading into all facets of the economy. GBP/JPY - Pound Plunges vs Yen, Down 500 Pips Last 4 Sessions
The Pound-Yen, a volatile pair linked to carry trade and sentiments about UK interest rates has been in a sharp decline the last four sessions. The sterling was down 200 pips on the day, and more than 500 pips down since hitting a high at 213.90 on Thursday. GBP/USD - Pound Continues Sliding vs. Dollar
The Pound continued its decline vs the US Dollar as well. The Pound-Dollar pair broke below 1.91, and declined about 100 pips to find support near 1.8970. Here, the Pound has also dropped more than 500 pips in the last 4 sessions.
US Trade Balance Boosted by Sharp Gain in Export
In the US, a surge in exports helped shrink the June trade deficit to $56.8B, a surprising Dollar-positive result. Imports were up 1.8% as the US paid a higher price for oil. Meanwhile, boosted by the lower dollar, exports jumped 4%, the largest monthly growth since February 2004. EUR/USD - Euro Falls to 1.4815, US Trade Dats Boosts Greenback in NY Trading
The Euro-Dollar hit a new low at 1.4815 overnight, then rebounded about 140 pips to test resistance at 1.4670 which held. In NY trading, following the US trade data the Dollar began climbing again. The last two intra-day highs have been successively lower, a sign of dollar resilience. CAN Trade Surplus Widens to C$5.8 Billion In Canada, the trade balance rose to C$5.8 billion in June, higher than expected. Exports were up 3.1%, with those going to the US up 5.3%. Imports grew 2%, the 3rd monthly increase in a row. USD/CAD - Loonie Shows Some Life after Reaching 1.07 Following Trade Report
The US Dollar-Canadian Dollar fell in favor of the Loonie following the Canadian trade report. From its level near 1.07, the pair dipped about 70 pips to trade near 1.0630, cutting into some of the recent gains seen Monday. Upcoming Releases Tonight, Japan releases GDP data for the 2nd quarter, which is expected to show a decline. Australia follows up by releasing data on consumer confidence and wages. Overnight the UK releases its claimant count along with the BOE quarterly inflation report. Also overnight the Euro-zone will post its industrial production data. Tomorrow morning the US releases reports on retail sales, import prices and business inventory |
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