U.S. Dollar Trading (USD) stocks around the world enjoyed a solid relief rally overnight and EUR/USD sellers booked profit on short trades leading to USD weakness across the board. Weak June Home Sales at 350k vs. 369k previously added to mounting speculation the FED will move sooner than later to help the US economy. Looking ahead, Weekly Jobless Claims forecast at 380k vs. 386k previously. Also June Durable Goods Orders forecast at 0.4% vs. 1.3% previously.
The Euro (EUR) the EUR/USD shot higher as Nowonty suggested the ESM (the Eurozone Bailout Fund recently agreed upon to save Spain) should be given a Banking license. This would open the fund up to loans from the ECB but is controversial because this would be akin to monetizing the EU Government Debt. The German response to Nowotny suggestion should be interesting.
The Japanese Yen (JPY) the USD/JPY is under continuous pressure from USD weakness on QE3 expectations and from EUR/JPY weakness when negative Eurozone news emerged. The Y78 level is holding for now but overnight we heard from the BOJ Yamaguchi that intervention isn’t imminent and this could weigh if more aggressive attempts are made to break the key support.
The Sterling (GBP) the GBP/USD was smacked lower after Q2 GBP fell quicker than forecast at -0.7% vs. -0.3% forecast by economists. Bad weather was blamed but it is still very negative with the market selling GBP aggressively across the board. The EUR/GBP helped the EUR/USD rally and the important cross finished the day at 0.7840. GBP/USD fell to 1.5460 but had hit a day high of 1.5550 as the EUR/USD moved higher. Looking ahead, German GFK Consumer Sentiment is forecast at 5.8 in August.
Australian Dollar (AUD) the AUD/USD reversed as aggressively from the start of Asia where support was found at 1.0180 after CPI came in slightly weaker than expected at 0.5% vs. 0.6% forecast Q/Q. The EUR/USD and subsequent US stock market rally helped extend the rebound into a full blown risk rally and we saw a move above 1.0300 and then on to fresh week highs above 1.0330. The outlook is mixed with the Eurozone crisis still capable of pulling the AUD lower but the commodity currency remains well supported on the dip.
Oil & Gold (XAU) Gold surged out of its range to break above $1600 and close above the key level in a bullish move. OIL/USD was mixed with a dip o $87 bouncing back to $89 in another volatile day of trade.