Dollar ends five day losing streak
The US dollar gained this week, finishing a five day losing streak after positive news on the US twin deficits and then accelerating after news of growth in the industrial sector.
The US Department of Commerce said on Wednesday that the trade gap contracted to $55.4bn in May. Meanwhile, improved tax revenues were cited by the White House as it lowered its estimates for the fiscal deficit of the US federal government to a mere $333bn from $427bn.
With little or no reaction to the weak UK house prices data overnight in Asian markets it will be interesting to see whether the European markets position early today for sterling to remain under pressure as the week unfolds.
There were two reports that came out over the weekend, both highlighting the weakness of residential property prices. Internet based agents “Rightmove” reported price growth slowed to the lowest rate of growth in 10 years. According to them prices have dropped 1.0% m/m in the month through mid-July, which cut the y/y rate to just 0.2%. This is well down from last month’s 2.4% gain and the lowest since the summer of 1995. Meanwhile the Sunday Observer reported that the July RICS survey (published after the close today) would reveal the industry body expecting no growth in property prices at all this year.
This week the outlook for the consumer (and the housing market) is a key theme of the economic data releases. June’s Retail Sales figures are due on Thursday and any further signs of weakness in consumer spending will no doubt reinforce hopes that the Bank of England will start to cut interest rates. Some clues on this might be gathered from the minutes of the MPC’s meeting earlier this month, which are due for release on Wednesday. With downward revisions to GDP – the Q2 1st estimate is due on Friday – and a fall in employment are all likely to have convinced some members (more than 2 last time) to have voted for an immediate cut. Needless to say a 5-4 vote should go a long way to confirm that on the 4th August interest rates will move down to 4.50.
Meanwhile in the U.S. Mr Alan Greenspan the Federal Reserve Chairman will take centre stage when he delivers his monetary policy report to the House Financial Services Committee on Wednesday at 3.00pm our time. As usual, his testimony will be scrutinised particularly the mantra of a measured pace in interest rate rises is repeated. Other data that could cause a stir for the stronger dollar will be today’s TICS capital inflow numbers for May and later in the week the Leading Indicators for June, Philadelphia Fed survey and the FOMC minutes (June 30th).
In the Eurozone, analysts will hope to see a further improvement in the German ZEW business survey of economic conditions due tomorrow. E-Z Industrial Production figures for June are also due. This rose by 1.7% last month, which was better than expected. Can this be sustained? If both releases show further gains then the euro could receive a small boost.
The US Department of Commerce said on Wednesday that the trade gap contracted to $55.4bn in May. Meanwhile, improved tax revenues were cited by the White House as it lowered its estimates for the fiscal deficit of the US federal government to a mere $333bn from $427bn.
With little or no reaction to the weak UK house prices data overnight in Asian markets it will be interesting to see whether the European markets position early today for sterling to remain under pressure as the week unfolds.
There were two reports that came out over the weekend, both highlighting the weakness of residential property prices. Internet based agents “Rightmove” reported price growth slowed to the lowest rate of growth in 10 years. According to them prices have dropped 1.0% m/m in the month through mid-July, which cut the y/y rate to just 0.2%. This is well down from last month’s 2.4% gain and the lowest since the summer of 1995. Meanwhile the Sunday Observer reported that the July RICS survey (published after the close today) would reveal the industry body expecting no growth in property prices at all this year.
This week the outlook for the consumer (and the housing market) is a key theme of the economic data releases. June’s Retail Sales figures are due on Thursday and any further signs of weakness in consumer spending will no doubt reinforce hopes that the Bank of England will start to cut interest rates. Some clues on this might be gathered from the minutes of the MPC’s meeting earlier this month, which are due for release on Wednesday. With downward revisions to GDP – the Q2 1st estimate is due on Friday – and a fall in employment are all likely to have convinced some members (more than 2 last time) to have voted for an immediate cut. Needless to say a 5-4 vote should go a long way to confirm that on the 4th August interest rates will move down to 4.50.
Meanwhile in the U.S. Mr Alan Greenspan the Federal Reserve Chairman will take centre stage when he delivers his monetary policy report to the House Financial Services Committee on Wednesday at 3.00pm our time. As usual, his testimony will be scrutinised particularly the mantra of a measured pace in interest rate rises is repeated. Other data that could cause a stir for the stronger dollar will be today’s TICS capital inflow numbers for May and later in the week the Leading Indicators for June, Philadelphia Fed survey and the FOMC minutes (June 30th).
In the Eurozone, analysts will hope to see a further improvement in the German ZEW business survey of economic conditions due tomorrow. E-Z Industrial Production figures for June are also due. This rose by 1.7% last month, which was better than expected. Can this be sustained? If both releases show further gains then the euro could receive a small boost.
posted by Drs Search @ 8:35 AM
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