- Fed downgrades US economic forecast in FOMC minutes
- US retail sales fall 0.5% in June, ex-autos -0.1%
- US business inventories rise 0.1% in May
- Fed’s Hoenig: Modest recovery continues; no double dip
- Moody’ downgrades 8 Portuguese banks day after sovereign cut
- IMF warns much work to be done in cleaning up Irish banking sector
- White House claims stimulus created 2.5 to 3.6 mln jobs and accounted for 2.7 to 3.2% of US GDP this year.
- IMF: Japan needs to hike consumption tax to cut debt
- US sells $13 bln 30-year bonds at 4.08%. bid to cover 2.89
- US equities close virtually unchanged, S&P at 1095
- US 10-year note closes 6 bp lower in yield at 3.05%
EUR/USD edged lower in the wake of soft US retail sales data as risk aversion edged up for a time. Stop-loss sell orders in the 1.2670/80 area were targeted by short-term speculators but prices bottomed at 1.2683 before a bounce. Traders were frustrated by the lack of follow-through to the upside in European and early US trading amid reports of selling from several central banks, among them the SNB, a bank on the Indian subcontinent and from a Middle Eastern central bank.
The upside catalyst that sent EUR/USD to fresh highs was ironically buying from yet another central bank, the BIS. They began to bid for EUR/USD around the 1.2705 level and before long we were triggering stops above the 1.2740 level. We reached 1.2778 before all was said and done, stalling just shy of the 50% retracement of the 1.3695/1.1875 decline at 1.2785.Dips were limited to the high 1.2720s after downbeat FOMC minutes.
USD/JPY gave ground as the day wore on, undercut by slumping US bond yields from their recent highs and demand for JPY on Mizuho’s stock offering. It fell toward 88.05 support from where it bounced smartly, to 88.40 at the close.
Cable’s gains came mostly during the London morning leaving US traders to deal with a choppy consolidation between 1.5205 and 1.5297, the high made as London walked out the door. We end above the key 1.5230 level at 1.5262.
AUD rallied to 0.8870, triggering stops above 0.8850 as the EUR broke to fresh two-month highs. It eased back to 0.8810 in the afternoon on the downbeat Fed and ends at 0.8830.
CAD once again faltered after a probe below the 1.0300 level (1.0284 lows). Like a beach-ball, it bobbed back to the surface at 1.0350 and closes at 1.0325. As we wrote yesterday, gains may come, but they won’t come easy for the Loonie from these levels, it appears.
