Gold has safe haven appeal, U.S. dollar and U.S. equities sell off, euro rises versus major peers, as sterling falters
The U.S. dollar plunged to an eleven month low, versus the majority of it’s peers, during Tuesday’s trading sessions. Despite the USA equity indices breaching records many times since the Trump election win, the U.S. dollar, arguably a more valid representation of international confidence in the USA economy, has fallen like a rock over recent weeks. Trump’s continual failure to repeal what’s referred to as “Obamacare”, has left political analysts in no doubt that his administration will be hampered, at every turn, when his Republican Party attempt to push through his election winning policies.
In terms of economic calendar events pertaining to the USA, import prices have risen by 1.5% YoY, whilst export prices have risen by 0.6% YoY, and falling by -0.2% in the month of June. The NAHB housing market index missed forecast of 67, by coming it at 64.
The DJIA ended the day down 0.27% and the SPX was flat, the dollar index fell by circa 0.6% to fall to the lowest level seen since August 2016. In a correlated move, Gold rose to $1241 per ounce, up 0.7% on the day, reaching R3 at one stage, and a high of $1244.78, representing a significant rise, from the recent low of circa $1207, reached on July 10th. Oil has also rebounded from its early July lows of circa $43 per barrel, to close the day out up 1%, at approx. $46.63 per barrel, receding from its daily high above R1, at $47.16.
USD/JPY slumped to a low of 112.03 breaching S3, before recovering to close down circa 0.8% at 112.03. EUR/USD rose by circa 0.8% to 1.1555, receding from the daily high of 1.5832, but price remained above R3, sited at 1.1547. GBP/USD ended the day close to flat at 1.3043, the UK’s pound was the only major currency that the dollar didn’t fall versus. The UK’s CPI inflation rate falling to 2.6% in June, from 2.9% in May, cooled speculation that the BoE, through its monetary policy committee (MPC), would need to raise rates to cool inflation. EUR/GBP made significant gains, closing the day out just below R3 at circa 0.8859, up circa 0.7%, after reaching a daily high of 0.8899. Sterling followed a similar pattern, versus all of its significant peers.
European economic news began with the ECB lending survey which helped boost demand for the euro versus the major currencies. However, versus the Aussie the euro fell, as did the majority of the Aussie peers, the minutes from the Australian central bank’s recent policy meeting, released early Tuesday morning, provided a boost to the commodity currency; AUD/USD rising by over 1% on the day to 0.7918, smashing through R3, reaching a daily high of 0.7943. Further European news concerned the various ZEW surveys; German sentiment coming in below expectations, at 17.5.
The UK’s monthly inflation data series was published on Tuesday, and on a YoY basis: CPI fell to 2.6%, RPI fell to 3.5%, producer input inflation fell to 9.9%, with house price inflation falling to 4.6%. The improvement in sterling’s value versus the US. dollar and oil falling from its 2017 high of circa $54 a barrel, has eased the UK’s Brexit referendum inflation scare, for now. European indices sold off sharply; STOXX 50 fell by -1.08%, DAX closed down 1.25%, CAC down by 1.09%, with the UK’s FTSE falling more moderately, by 0.19%.
Economic calendar news for July 19th, all times quoted are London GMT time
09:00, currency impacted EUR. Euro-Zone Construction Output w.d.a. (YoY) (MAY). Construction output is forecast to remain at circa 3.2% growth YoY.
11:00, currency impacted USD. MBA Mortgage Applications (JUL 14). Mortgage applications are predictors to improve from the -7.4% fall registered last week.
12:30, currency impacted USD. Housing Starts (MoM) (JUN). The expectation is for a significant increase to 6.2%, from the -5.5% drop experienced in May.
12:30, currency impacted USD. Building Permits (MoM) (JUN). The forecast is for an increase to 2.8%, from the -4.9% registered in May.
14:30, currency impacted USD. DOE U.S. Crude Oil Inventories (JUL 14). The forecast is for a drop off to-3600k, from the -7564k fall registered last week.