Thursday July 22, 2004 - 21:17:59 GMT
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Dollar Pushed And Pulled By Mixed Data
• Dollar Jumps and Ducks From Jobless Claims and Leading Indicators
• UK Retail Sales Nearly Quadruples Estimates; 1.1% vs. 0.4%
• Japanese Imports Grow As Manufacturers Boost Machinery Purchases
The euro traded in a modest 60 pip range today with the dollar compared to yesterday’s sharp dollar rally. The trading day has been range bound as both currencies remained soft from unenthusiastic economic releases. On the European side, the May Euro-zone trade surplus widened less than expected to 7.3 billion euros against estimates of 8.5 billion. The report showed a decline in exports and imports from April’s balance of 7.0 billion after an upward revision. Both exports and imports fell by a seasonally adjusted 0.8%, ending 5 consecutive months of export gains. In addition, French consumer spending also unexpectedly increased by 4.2% in June to an 8-year high, despite economist’ expectations of a paltry 0.4%. The report shows a reduction in household savings as an improving global outlook encourages more consumers to spend. US morning trade proved to be the most volatile for the EURUSD as it traded down below 1.2240 after the release of a better than expected US jobless claims. Shortly after, the dollar lost its briefly gained ground from a disappointing Leading Indicator Index causing the currency pair to climb to a high of 1.2294. The pair wound up mostly unchanged towards the end of the trading day around 1.2250 as earlier momentum wore off.
The gave back on its previous two-day run up after Greenspan stepped down from the stage for the time being. Federal Reserve Chairman Alan Greenspan’s remarks in Washington D.C. made waves earlier this week, stating that the U.S. central bank was ready to move more aggressively to keep inflation under control. The dollar received a push and pull today in the US morning with the release of both a declining jobless claims and a Leading Indicator index. Last week’s unemployment claims fell by ten thousand to 339k against economist forecasts of 345k. Though summer job numbers are currently volatile due to seasonal factory shutdowns and retooling in the auto industry, the employment situation in July has mostly likely improved. Today’s release confirmed last week’s Philly Fed survey that measured employment at 24.6 points, with anything above 0 signaling expansion. The dollar briefly rallied only to be reversed with a disappointing Leading Indicator index less than 2 hours later. The index came in at -0.2% versus estimates of 0%. The measure of future economic activity fell due to slowdown in a series of recent economic indicators. A significant portion can be attributed to June’s decline in building permits, which dropped by 8.2%. The dollar remained largely unmoved by the middle of the day, gaining a small burst of strength at the end of the trading session.
UK retail sales continued to be strong in June as it grew by 1.1%, following a 0.8% gain in the previous month. The release was a pound positive surprise as economists expected a lag in sales growth down to 0.4%. Retail sales were apparently driven up by this summer’s European Cup as consumers purchased more television sets and football memorabilia and clothing. Non-food stores reported a 3% increase in sales last month. Though consumers do not seem to be reacting to the recent interest rate hikes, today’s release makes it highly likely that the Bank of England will further raise rates by 25bp on August 5th. Markets currently expect the interest rate target to be at 5.25% by the end of 2004. Tomorrow’s GDP release will give a clearer picture into UK growth as manufacturers are starting to pull out of a decline. The pounded traded to a high of 1.8496 against the dollar today with a trading range of almost 147 pips. By the end of the US session, the GBPUSD fell back down floating around the 1.8430 level.
Japan also released its trade balance late yesterday GMT time with a much narrower than expected surplus. In June, Japan’s trade balance grew slightly from a revised 931.8 billion yen to 1,147.0 billion versus expectations at 1,300 billion. The shrinkage was due to an unexpected rise in imports as more manufacturers purchased foreign machinery to increase production and capacity. Seasonally adjusted imports rose by 6% to its highest levels in over 8 years. In a speech to central bank managers, BoJ Governor Fuki expects that “the economy will gather stronger momentum” with recovering demand as it is “buoyed by exports and capital investments.” Currently, capital spending by manufacturers is at its 15 year high according to the previous Tankan report. The USDJPY traded down to a low 109.25 in late Asian trading.
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