Forex Investment and Currency Trading

The USD is a little weaker today, after oil prices reversed course and climbed higher on the back of yesterday’s EIA inventory reports. Crude oil closed at $126.77, which was more than $4 higher than the prior day’s close, and was its highest close in more than a week. Yesterday the Fed announced that it would be extending the TSLF and PDCF until (at least) January 30, that it was increasing the term to maturity in its TAF, and that it was increasing its swap line with the ECB. Clearly the Fed believes that liquidity is still a major issue for the U.S. economy, which suggests that the Fed will not be raising rates any time soon.

Overnight the Euro rose against most of the majors as its inflation rate hit a 16-year high of 4.1%. However, the Euro’s gains may have been tempered by a simultaneous unemployment report, where the 7.3% rate exceeded market expectations of 7.2%, as well as the raft of weak data that we’ve seen over the last couple of weeks. As a result, rate hike expectations for the Eurozone are essentially unchanged from yesterday, despite the higher inflation rate. EUR is trading just above 1.56 this morning, and EURJPY back up to just short of 170.

Data
Australia saw some extremely weak data overnight, with retail sales for June falling by 1.0%, which was much worse than the flat reading that the markets had expected. Credit growth also deteriorated and fell to a 6-year low. Now it would not be surprised to see the RBA cutting rates sooner than in December, given the quick downward turn we’ve seen in the economic data. However, the reaction in AUD was muted, thanks to an improvement in the trade balance from a deficit of $253M to a surplus of $411M.

New Zealand business confidence fell further into the red in July, falling to -43. The NBNZ’s composite growth measure from the survey is suggesting that the “technical” recession will morph into something uglier.

Japanese housing starts were a little stronger than expected in June at 1.130M. However, starts are still 16.7% lower than they were a year ago.

The Eurozone’s flash CPI estimate for July came in exactly in line with expectations at 4.1%. However, because of the cut-off date for collecting prices for CPI, today’s estimate would not have fully taken into account the fall in oil prices in July, and the 2nd estimate of CPI is expected to be revised down. The Eurozone unemployment rate for June was also released this morning, and came in at 7.3%, unchanged from the upwardly-revised 7.3% rate in May.
The UK saw another weak housing market report overnight, as the Nationwide house price measure dropped by 1.7% M/M in July, pushing the Y/Y rate down the 8.1%. This was quite a bit worse than expected, and is the biggest decline in prices since 1991. The UK’s GfK consumer confidence measure was also worse than expected, falling from -34 to -39 in July, which is the lowest level ever recorded since the survey began in 1974.

In the U.S. the data calendar picks up today, with the advanced estimate of Q2 GDP.