Forex headlines for July 22, 2014:
- June 2014 US CPI 2.1% vs 2.1% exp y/y
- Core 1.9% vs 2.0% exp y/y
- May 2014 US FHFA house prices 0.4% vs 0.2% exp m/m
- US June existing home sales 5.04M vs 4.99M expected
- July 2014 Richmond Fed manufacturing index 7 vs 5 exp
- June rate cuts are affecting the market exactly as we want says ECB – MNI
- European officials punt on sanctions
- Palestinian leadership proposes to Egypt plan for Gaza ceasefire
- MNI: Governing council likely to wait until December to study monetary policy changes
- S&P 500 gains 10 points to 1983, touches record 1986
- Gold down $6 to $1306
- WTI crude down $0.17 to $104.42
- AUD leads, CHF lags
The top economic news was the CPI data and when the core numbers were soft the US dollar shuddered. It fell 20-40 pips virtually across the board as the market priced in a dovish Yellen forever. Or at least that was the thinking for an hour or so. Cooler heads later prevailed and the dollar completely erased the losses and then chopped sideways after Europe clocked off.
There wasn’t a headline to hang the euro weakness on. The pair was barely hanging onto 1.3515/25 overnight and couldn’t bounce. The pressure mounted and the dam broke. Cascading stops sent the pair to 1.3480 and then a second wave broke the Feb low and busted to a session low of 1.3459 early in US trading. It quickly bounced back to 1.3490 but couldn’t get above 1.3500 on the CPI numbers and then shrank back to 1.3460. If the session low breaks, look for more selling.
EUR/JPY touched the lowest since February and posted an outside bearish reversal despite stocks hitting an all-time high. That’s not a great sign.
The Australian dollar came into the session on an upswing after Stevens passed up the opportunity to throw another dovish dart. It shot to a session high of 0.9422 after the US CPI data as the US dollar sold off broadly. But the big dollar made a comeback and we finish US trading roughly where we started at 0.9391.
The latest thrust in the US dollar has been down and that’s most-evident in USD/CAD. It was at the high of the day at 1.0759 heading into CPI and then sank to 1.0732. A bounce to 1.0750 faded and we finish near the lows of the day at 1.0736.
Cable is turning into a bit of a dog. Last week’s inflation numbers are old news and the bulls look they’ve run out of life. The low of 1.7042 barely held last week’s low and we’re about to complete the 5th day of losses.
Gold tried the upside on the CPI numbers but it’s tough to argue for more printing just yet and the jump to $1316 quickly faded back to $1306.
