Major indices continue their slump taking certain currencies south in tandem
China growth concerns, due to the HSBC ‘PMI’ numbers printing short of economists’ expectations, combined with the lingering impact of the FOMC comments of last week, caused a continuation of the sell off in US stock markets witnessed late last week. The DJIA falling sharply shortly ater the opening bell in New York on Monday…
This fall was mirrored by similar falls in London where the UK FTSE flirted with the critical psyche round number of 6000, which if breached would have represented a circa 800 point fall from the yearly high reached in late May. At one point the DJIA had fallen 200 points in Monday’s trading session, but recovered towards the end of the session to trade down 125 points, representing a fall of 0.85% on the day. The UK FTSE closed down 87 points, just 29 points short of the critical 6000 level. The sell off was not limited to the UK and USA, the German main index, the DAX, closed down 96 points on the day or 1.24%.
Dollar index reached a two week high
The dollar index reached a two week high as investors sought the safe haven refuge of the greenback. The Dollar Index, which Intercontinental Exchange uses to gauge the U.S. currency versus those of its six major trading peer partners, rose 0.3 percent to 82.524 at the midpoint of the trading session in New York after reaching its highest level since June 5.
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Deutsche Bank AG’s G10 FX Carry Basket index fell to 112.22, reaching the lowest level witnessed since September. The index gained 6.8 percent in 2012 after declining the previous two years due to weak economic data in the U.S., Japan and the euro region leading to speculation that central banks will keep rates low and inject money to boost growth.
JPMorgan Chase & Co.’s Group of Seven Volatility Index, based on currency option premiums, rose as high as 11.95 percent on Monday. This is the highest figure reached since January 2012. The gauge has averaged 8.76 percent over the past calendar year.
According to the Bloomberg Correlation-Weighted Index the Canadian dollar has fallen along with the currencies of fellow commodity currency exporters during the past month versus a basket of nine developed nation currencies tracked by the index. The loonie weakened 1.2 percent, the Australian and New Zealand dollars lost 3.6 percent and 4 percent, respectively. The U.S. dollar has gained 1 percent.
Forex in focus
The dollar advanced 0.1 percent to $1.3105 per euro after appreciating to its strongest level since June 6. The U.S. currency weakened 0.1 percent to 97.78 yen. The yen added 0.2 percent to 128.15 per euro.
The Loonie, the Canadian dollar, closed in on a near two year low in Monday’s sessions. The loonie, fell 0.6 percent to C$1.0523 per U.S. dollar at lunchtime Monday in Toronto, after reaching its lowest level since Oct. 5, 2011. One loonie currently buys 95.03 U.S. cents.
The Aussie dollar fell 0.4 percent to 91.82 U.S. cents in the Sydney session from June 21, when it suffered a 3.7 percent weekly drop, the largest drop since Sept. 23, 2011 at one point reaching 91.57, the weakest level witnessed since September 2010. Futures traders increased their bets that the Australian dollar will continue its decline versus the U.S. dollar, figures from the COT report revealed; the print from the Commodity Futures Trading Commission reveals the overall commitment of traders (COT).
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The difference in the number of wagers by hedge funds and other large speculators and investors on a further decline in the Australian dollar compared with those on a gain; net shorts was 63,521 on June 18. This represents the most bearish stance in data going back as far as January 1993 and compares with net shorts of 63,277 the week earlier. New Zealand’s kiwi dollar fell 0.1 percent to 77.40 U.S. cents from the end of last week. It touched 77.01 on June 21, the lowest price printed in over a year.
Economic fundamental and news events that rate as high impact for Tuesday June 25th
The markets in the USA are in dire need of a confidence infusion. However, the consumer confidence print due tomorrow, despite it rating as high impact, may not be enough to jolt the markets into a positive ‘swing’ mood. The publication comes courtesy of The Conference Board, the previous consumer confidence print registered 76.2, the expectation is for a modest retreat to 75.6. Traders need to be aware that a violent reversion to an area of perhaps 70 could add to the pervasive gloom currently throttling the main indices and consequently impact on the major currency pairs.
The USA durable goods orders, printed courtesy of the USA census bureau, is expected to print at 3.0%, a modest retreat from the 3.5% printed last month. New home sales in the USA could provide a boost to sentiment. How the USA continues the brush under the financial carpet the close on twelve million repossessed homes that are in a ‘twilight zone’ – not showing on any stats other than banks’ ‘mark to model’ balance sheets, is still an issue that isn’t fooling too many seasoned institutional investors.
Finishing on the subject of housing the UK’s BBA is due to print their latest mortgage approval figures. The expected print is circa 33K, an improvement of 1K on the previous month. At 33K this still demonstrates a huge gap from the peak of mortgage creation in 2007 when the BBA printed figures easily doubling that lending figure.