| 6/26/2008
3:00 PM: EUR/$..1.5758 $/JPY..106.64 GBP/$..1.9874
$/CHF..1.0227 AUD/$..0.9568 $/CAD..1.0116
USD Declines Amid Equity
Sell-Off
Traders continued to sell the dollar in the Thursday
session, sending the currency to its lowest level
in 2 ½-weeks versus the euro at 1.5750
while falling to a near 2-month low against the
sterling just shy of the 1.99-mark. Sentiment
for the greenback remains soft following yesterday’s
FOMC policy statement which tempered market expectations
for an imminent rate hike by the Fed. Despite
the Fed adding greater weight to its emphasis
on inflation, the statement fell short of explicitly
hinting at any imminent policy tightening, thus
prompting a sell-off in the dollar.
The economic reports released today were largely
inline with consensus estimates, with the releases
of revised Q1 GDP, core PCE, weekly jobless claims,
and existing home sales. The final release of
Q1 GDP remained unchanged at 1%, improving from
0.9% previously. Weekly jobless claims edged higher
to 384k, compared with 381k from a week earlier.
Meanwhile, existing home sales in May improved
by more than forecast, up 2% to 4.99 million units
versus 4.89 million units in April.
In the Friday session markets will digest a barrage
of US economic data, including May personal income,
real consumption, personal spending, PCE index,
and the University of Michigan consumer sentiment
survey. With sentiment mired near its lowest levels
in 28-years, the June University of Michigan consumer
sentiment survey will be closely scrutinized.
Consensus estimates are calling for the final
reading in the June sentiment survey to remain
near its multi-decade lows at 57.0 from 59.8 in
May.
The US equity bourses also slumped, with the
Dow Jones lower by nearly 2.4% and the Nasdaq
falling by over 3% to levels not seen since 2006.
Lingering fears over the stability of the financial
system were exacerbated by the downgrade of Citigroup
to Goldman Sach’s ‘conviction sell’
list. The weakness in US equities will also continue
to weigh on the dollar.
JPY edges up amid heightened risk aversion
The yen recovered from earlier losses against
the majors as the US equity sell-off prompted
traders to buy the Japanese currency, pushing
it to 106.66 against the dollar and regaining
its footing against the euro to 168. The economic
calendar from Japan later this evening will see
several key reports, including the May unemployment
rate, CPI, retail sales, household spending and
industrial production. The unemployment rate in
May is expected to remain unchanged at 4.0% while
May CPI is seen rising to 1.4% from 0.9%. We look
for the yen to continue to strengthen against
the dollar amid heightened uncertainty over the
US economic outlook, which in turn will result
in lingering jitters of the stock markets.
Euro Firms, Awaits Data
The euro edged to its highest level in 2 ½-weeks
to 1.5763. Traders will look ahead to economic
reports due out in early Friday. The data include
Germany’s June CPI, retail sales and Eurozone
April current account balance due out. The inflation
data from Germany is seen edging higher to 3.2%
from 3.0% a year earlier, while easing to 0.2%
from 0.6% a month earlier. However, retail sales
in May are expected to reverse the 1.7% decline
in April, rising by 0.5%.
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