- US Q2 GDP falls 1.0% slightly better than expected, consumer spending weak; Q1 revised much weaker, down -6.4%
- NY City NAPM rises to 48.3 from 44.8
- Chicago PMI rises to 43.4 in July from 39.9, slightly better than expected
- IMF: Dollar moderately overvalued
- JP Morgan raises Q3 GDP forecast to 3%
- Fitch maintains UK AAA rating
- Cash for clunkers success has economists forecasting a jump in US auto production in second half with positive GDP impact
- Obama: Guardedly optimistic economy has turned quarter
- ECB Sources: ECB preparing further non-standard measures in case rebound does not take hold- Market News International
- US equities ended essentially unchanged, rise 7.8% on the month; bond yields fall 12 bp after mixed GDP, auction aftermath
- Oil rises 3.2% to $69.05, Copper rises 2.5%, CRB index up 1.7%
Month-end considerations overshadowed economics and technicals today as very large interest to sell dollars as a result of big jumps in US asset prices this month was a driving force. Passive investors typically hedge the currency changes to their portfolios once a month at month-end. With the S&P up 8% in July, that meant a lot of dollars need to be sold. The currencies that were most heavily rumored to be movers today were in fact the leaders as EUR/USD, GBP/USD, AUD/USD were spotlighted.
EUR/USD dipped to the 1.4100 area after the big downward revision to US GDP but it soon began its recover and the closer we got to the end of the day, the firmer EUR/USD got. At the 15:00 GMT fixing, EUR/USD was at 1.4175. Traders apparently believed (as I did) that once the fixing flows were out of the way EUR/USD would lose its bid. Whoops! A quick 100 pips later, the market finally got square.
Similar story in cable as that pair rose within a ten pips of its highs for the year at 1.6744 before stalling.
AUD/USD made a new high, rising through 0.8338 in thin afternoon trade and reaching 0.8367.
I’ll be off Monday, Tuesday and Wednesday next week. I’ll leave you in the capable hands of Mark Mitchell of FX Hub fame. Have a great weekend, all!
