- US personal income and spending flat in June; savings rate rises to 6.4%
- US factory orders fall 1.2% in June
- US pending home sales fall 2.6% in June
- China to open up domestic gold trading
- Greece appoints former ECB vice president Padoa-Schioppa as government adviser
- US auto sales rise slightly in July
- S&P 500 falls 0.5% to 1120; closes a second day above 200-day avg
- US 10-year note yield falls to 2.90%, down 6 bp; 2-year note record low 0.53%
- Oil rise $1 to 82.35, gold rises $5 to $1186
The dollar traded an inside day in New York trade, consolidating the losses made in the London session this morning. After a string of weak US economic data points, both EUR/USD and GBP/USD sustained some profit-taking but each failed to trigger a cluster of stops just below important support points. EUR/USD bounced from 1.3183 lows, Cable from 1.5893. We close at 1.3232 and 1.5946, respectively. Cable held just below the 61.8% retracement at 1.5970, it should be noted.
The market was abuzz early in the session on talk the Fed would begin to reinvest the proceeds of pre-payments on its mortgage-backed securities portfolio instead of letting the cash reduce the size of the Fed’s balance sheet. That would be a subtle shift, resulting in th purchase of about $200 bln a year in mortgages (they already own $1.4 trln).
Some saw the potential move as panic-driven at this stage of the cycle. The may have just been floating a trial balloon in the media and could decided to abandon the idea before the next meeting on Tuesday of next week.
USD/JPY was plagued by comments during London trade from Japanese FinMin Nota that while the government is concerned the strong JPY will hurt the economy, the exchange rate is set by the market. USD/JPY fell as low as 85.67 in New York trade but eventually bounced as six separate waves of selling met buying in the high 86.60s and low 85.70s. Traders speculate semi-official buyers may be trying to slow the decline.
Low US bond yields and a narrowing spread between Japanese and US rates were a major thorn in the side of USD/JPY.
AUD/USD was very choppy in NY trade, slumping as low as 0.9084 before sprinting up to fresh trend highs at 0.9150. Conflicting fundamentals like slowing China growth and an extended pause foreseen from the RBA are doing battle with the trend toward risk assumption among investors globally. I expect Aussie and CAD to under-perform EUR and GBP against that backdrop. CAD traded an uneventful 1.0220/1.0275 range.
