- US retail sales rise 2.7%; ex-autos 1.1%, “core” sales up 0.4%; better than expected
- Empire State Manufacturing index rises to 18.9, highest in nearly two years; stronger than forecast
- US producer prices rise 1.7%, core up 0.2%; stronger than expected
- US business inventories fall 1.0% in July; slightly more than forecast
- UK Chancellor Darling: Recession likely over by year-end; seeing encouraging signs on the economy
- ECB”s Quaden: Economy doing better than expected, must start exit strategies, but gradually
- UK’s Brown: Recovery not automatic; spending will be cut but not front-line programs
- Fed’s Bernanke: Recession may have technically ended, but very weak recovery
- ECB’s Stark: Risks from rates staying too low for too long, like asset bubbles.
- Warren Buffett: Buying US stocks, sees good value; economy will recover, though hasn’t yet
- S&P 500 rises to new closing high on S&P at 1053, up 0.3%
- Oil rises $2.00 to $70.95, Gold closes at $1007
Strong US economic data, hawkish comments from ECB speakers and Bernanke’s comment that the recession has likely ended helped underpin risk-on mentality and sent EUR/USD to its highest levels since last December, trading as high as 1.4686.
Prices did not rally straight away, however, as a dip to 1.4560 was seen shortly after the US data. Selling from the BIS helped cap gains in the 1.46-teens for quiet some time. Once that selling was absorbed though, the market never looked back.
EUR/GBP buying was a very strong trend today after BOE governor King this morning signaled deposit rates at the Old Lady may be lowered to try and spur more bank lending. Cable fell as low as 1.6405 before rebounding as the dollar fell during the afternoon. EUR/GBP was well-bid all day and jumped as high as 0.8898 before stalling. Barriers at 0.8900 are rumored.
USD/JPY triggered stops above 91.20 this morning after another round of jawboning from the Japanese MOF. A rise to 91.63 was seen, absorbing Japanese exporter offers, before sliding back later in the day on broad dollar weakness. EUR/JPY was choppy but recovered intraday dips below 133.00 to end at 133.60.
AUD/USD fell on profit-taking early in the session as US data was unable to sustain an early rally. A dip to 0.865 was seen late in London before US weakness in the afternoon saw the mid 0.86 level revisited. There remains some concern that the RBA could seek to “smooth” the rally, selling some of the AUD bought late last year/early this year in the 0.60s.
