Euro – Euro bears might have hoped for a bigger impact from the ugly slump in consumer confidence embodied in the ZEW survey of economic sentiment released Tuesday. The August reading fell to -40 after -7 last time around. However, hopes remain that should Bernanke deliver the goods in the shape of dollar-weakening global stimulus this will not only filter through from Jackson Hole at the weekend, but also support the single currency. Purchasing managers data was also less bearish than investors had expected. Even though the PMI composite index at a reading of 51.1 was the lowest since September 2009, it neither matched a more bearish expectation nor did it signal contraction. The manufacturing index did, however, slip into contractionary grounds, although that was not mirrored in key German data, while the service index barely budged at 51.5. The euro reached its $1.4500 upper boundary before giving up most of the day’s gains to trade at $1.4399.
British pound – Rising mortgage applications for July provided a good enough excuse for sterling bulls to ride the pound higher on Tuesday. The pound reached as high as $1.6567 against the dollar before fading. But there were also encouraging signs from the August CBI Trends survey, which showed a turnaround from previously gloomy data. The total orders reading for the month stepped back into positive territory at 17 after a July index of -10. The balance of respondents expecting to raise prices also rose to nine from four. The euro weakened marginally against the pound to buy 87.14 pence.
Aussie dollar – News that the Chinese economy contracted at a marginally lesser pace was supportive of the higher-yielding Aussie dollar. It rose to a three-day high at $1.0522 U.S. cents after the HSBC manufacturing PMI beat its whisper number coming in at 49.8 after a July index reading of 49.3. Reserve Bank deputy governor Ric Battellino pinpointed China and Asian economies as growth bright-spots in a speech. But he also noted that by the time the central bank met in June, “signs were emerging that economic growth in many developed economies had lost some momentum.” The Aussie remains higher on the day and also gained against the yen to trade at ¥80.28.
Canadian dollar – The local dollar gave back a lot of its earlier strength against the U.S. dollar following the release of the June retail sales report. Dealers had expected a sharp rebound in auto sales in response to aggressive pricing. The report didn’t disappoint in that respect with the series matching the anticipated 0.7%. However, stripping out sales of cars and auto parts, the series dipped by 0.1%. Sales at appliance and electronics stores fell by 3% with the series flat since the third-quarter of last year. Office supply equipment and stationery sales were lower by 2.4% while receipts at gas stations fell for the first time in five months. There was good news within the report and its overall health indicates that the Canadian economy is doing well enough. The big unknown is of course the outlook for the U.S. economy and there is little in global news today that says that things are better in Canada’s number one market, other than pure optimism. The Canadian unit reached $1.0150 before falling back to $1.0115 U.S. cents.
Andrew Wilkinson is a Senior Market Analyst at Interactive Brokers LLC
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