Intraday Market Thoughts

USD Drops Across the Boad as Appetite Returns

by Patrik Urban
Aug 17, 2011 12:48

GBP recovered after dropping due to weak data. Eurozone inflation slowed in July. CHF gains after SNB disappoints with lack of radical steps to curb CHF rise. Market turns to July PPI and Canadian Foreign Securities Purchases.

GBP dropped across the board after July Jobless Claims increased to 37.1K well above expected 20K and the Unemployment rate increased to 7.9% from previous 7.7%. Furthermore, the MPC meeting minutes showed that no member was calling for additional interest rate hikes. Some members considered increasing asset purchases while others noted that the case for more QE is not yet strong enough. In reaction, GBPUSD dropped from around 1.6430 to 1.6350 hitting all GBP targets mentioned in Ashrafs latest premium piece. GBP has since recovered and currently trades above the pre-release level around 1.6430.

Core Eurozone consumer inflation slowed to 1.2% in July from previous 1.6% while headline CPI stayed unchanged at 2.5%. Monthly inflation dropped by 0.6%. Slower growth in Eurozone combined with the ongoing debt crisis contributed to lower price level.

CHF gained after SNB did not announce any radical steps to curb the currencys rise. The SNB decided to increase money market liquidity but did not announce speculated peg against the Euro nor negative interest rates. The SNB continues to view the Franc as being massively overvalued and there is a talk that SNB could set an exchange rate floor. EURCHF has dropped from 1547 to 1220 immediately after the press conference.

The New York session starts at 8:30 am ET with July PPI that is expected to stay unchanged on a monthly basis after dropping by 0.4% in June. Core PPI is expected at 0.2%. Given the disappointingly slow growth in the US, there is likely to be little pressure on producers as sales slow down.

8:30 am ET will also bring Canadian Foreign securities purchases that are expected to decrease to CAD 10.3B after shooting to CAD 15.4B a month earlier.


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