Euro bounces back against the Dollar
The Dollar fell against the Euro early this morning amid continued speculation over the now likely US rate hike next Tuesday.
The Euro jumped as market players closed down short positions after pushing the single currency to a two week low versus the Dollar yesterday with deepening uncertainty over the outcome of the German election on Sunday with opinion polls yesterday.
These stated that opposition leader Angela Merkel will fall short of an outright majority to Gerhard Shcroeder, who whilst in power has seen Germany’s unemployment reach its highest since World War II, not good news for the Euro.
Retail sales came out yesterday softer than expected, flat for the month, defying expectations of an increase and increasing speculation that the Bank of England will cut interest rates again in the coming months. As a result of August’s stagnation annual sales growth slowed to 0.8 percent, from a revised 1.3 percent the slowest annual growth since January 1996.
Sterling also dropped against the Dollar almost immediately after these results to the lowest since August 31st, an indication of the poor retail sales was also shown yesterday when the retailer Next announced their worst sales in 10 years.
From the U.S. we saw initial jobless claims for the week rise by 71,000 taking claims to 398,000, the biggest increase in over nine years.
This is mainly due to people thrown out of work by Hurricane Katrina, with an estimated 68,000 of that figure being down to the storm. Consumer prices rose for a second straight month in August at 0.5 percent with core rising 0.1 percent against their respective forecasts of 0.7 percent and 0.2 percent.
In the past year, the CPI is up 3.6 percent, the biggest year-over-year increase since early 2001. The September Philly Fed index reading was 2.2, below forecast. The Empire manufacturing survey, a reading of manufacturing activity in New York was 16.97.
This afternoon we see data from the U.S. including Current account data for (Q2) with the current account deficit expected at $193bn a touch lower than Q1 which was $195bn, this leaves the deficit 6.2% of GDP in Q2 from 6.4% in Q1.
However, this is not the start of an improving trend, as partial data already suggests that Q3 will widen to roughly 6.6%. After that we receive the Net foreign security purchases for July which is expected to come out at around $60bn inflow. Stock prices rose 1.6%, the 10-year treasury Yield rose 18bp, and the trade-weighed dollar fell at 0.3 percent.
And finally the Michigan sentiment for September which, given Hurricane Katrina and the associated surge in gasoline prices we think it could drop about 7 points, or possibly even more in September. This would take it to 82 from 89.1. Such a decline, if it happens, may be enough (in theory) to convince the Fed to pause at the September FOMC meeting, however saying that I wouldn’t hold my breath.
The Euro jumped as market players closed down short positions after pushing the single currency to a two week low versus the Dollar yesterday with deepening uncertainty over the outcome of the German election on Sunday with opinion polls yesterday.
These stated that opposition leader Angela Merkel will fall short of an outright majority to Gerhard Shcroeder, who whilst in power has seen Germany’s unemployment reach its highest since World War II, not good news for the Euro.
Retail sales came out yesterday softer than expected, flat for the month, defying expectations of an increase and increasing speculation that the Bank of England will cut interest rates again in the coming months. As a result of August’s stagnation annual sales growth slowed to 0.8 percent, from a revised 1.3 percent the slowest annual growth since January 1996.
Sterling also dropped against the Dollar almost immediately after these results to the lowest since August 31st, an indication of the poor retail sales was also shown yesterday when the retailer Next announced their worst sales in 10 years.
From the U.S. we saw initial jobless claims for the week rise by 71,000 taking claims to 398,000, the biggest increase in over nine years.
This is mainly due to people thrown out of work by Hurricane Katrina, with an estimated 68,000 of that figure being down to the storm. Consumer prices rose for a second straight month in August at 0.5 percent with core rising 0.1 percent against their respective forecasts of 0.7 percent and 0.2 percent.
In the past year, the CPI is up 3.6 percent, the biggest year-over-year increase since early 2001. The September Philly Fed index reading was 2.2, below forecast. The Empire manufacturing survey, a reading of manufacturing activity in New York was 16.97.
This afternoon we see data from the U.S. including Current account data for (Q2) with the current account deficit expected at $193bn a touch lower than Q1 which was $195bn, this leaves the deficit 6.2% of GDP in Q2 from 6.4% in Q1.
However, this is not the start of an improving trend, as partial data already suggests that Q3 will widen to roughly 6.6%. After that we receive the Net foreign security purchases for July which is expected to come out at around $60bn inflow. Stock prices rose 1.6%, the 10-year treasury Yield rose 18bp, and the trade-weighed dollar fell at 0.3 percent.
And finally the Michigan sentiment for September which, given Hurricane Katrina and the associated surge in gasoline prices we think it could drop about 7 points, or possibly even more in September. This would take it to 82 from 89.1. Such a decline, if it happens, may be enough (in theory) to convince the Fed to pause at the September FOMC meeting, however saying that I wouldn’t hold my breath.
posted by Drs Search @ 10:19 AM
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