| 6/9/2008
3:20 PM: EUR/$..1.5628 $/JPY..106.21 GBP/$..1.9720
$/CHF..1.0279 AUD/$..0.9486 $/CAD..1.0225
USD Rallies on Jawboning,
Housing
The dollar rallied sharply against the majors
at the start of the week as traders focused on
US economic reports released in the morning, breaking
through the 106-level versus the yen. Propping
the greenback higher today was an unexpectedly
stronger report on pending home sales, prompting
speculation that the struggling US housing market
may be bottoming. Pending home sales for April
surged to 6.3%, far exceeding estimates for an
improvement to -0.5% from -1.0% a month earlier.
Key highlights from the US economic calendar
include the April trade balance, June consumer
sentiment, the Fed’s Beige Book, retail
sales, business inventories, and May CPI. Markets
will focus closely on the US trade deficit and
gauge the impact of soaring energy prices in recent
months. Consensus estimates anticipate the deficit
to expand to $60.0 billion, up from $58.21 billion
from March. Retail sales are seen reversing the
0.2% decline in April, rising by 0.4%. Meanwhile,
core retail sales are expected to remain unchanged
at 0.5%.
The greenback also found support from US Treasury
Secretary Paulson and NY Fed President Geithner,
who both left open the option for central bank
intervention. Nonetheless, we interpret the risk
for government intervention in the currency market
to prop up the dollar to be minimal, particularly
given its staunch criticism of China’s currency
regime.
Sterling Buoyed by Data
The pound extended last week’s gains touching
the 1.98-level against the dollar and edging up
to 0.7920 versus the euro early in the New York
morning. The gains were sparked by UK inflation
data released overnight which further tempered
expectations for the Bank of England to cut interest
rates over the coming months. The May core PPI
output rose to 1.2%, beating expectations for
a decline to 0.4%, from 1.0% in April. The annualized
core PPI output reading surged to 5.9%, versus
4.5% in the previous year. Meanwhile, input prices
climbed to 3.9% m/m and 27.6% y/y.
The week ahead will see several key reports including
April manufacturing production, industrial production,
trade balance, unemployment, and the June RICS
housing survey.
|
