US Dollar:
The US dollar sprung back to life with a steady and encouraging rally posting the biggest positive move for the greenback since the 20th. Mondays docket produced both the monthly personal income and spending indicators, the data was generally an encouraging update for the pace of economic activity. The 0.4 percent increase in consumption and 0.2 percent improvement in income for July follows a month of no change for both. This is an encouraging development for an economy that has received a downgrade from the Federal Reserve and speculators at large. Yet, when we take into consideration the employment situation, collapsing housing recovery and other critical factors, it is hard to reconcile this new data as anything but a temporary de¬viation from a disappointing norm. Tonight’s Fed meeting minutes will be top of the bill today along with con¬sumer confidence. Since the policy authority announced its intensions to buy government debt and Chairman Bernanke expressed his doubts over the future of the economy last week, speculation of a double dip recession and/or quantitative easing has festered. And, on the topic of uncertainty.
DATA—US FOMC minutes AUG, USD Consumer confidence (AUG)
Pound:
The British Pound pared Friday’s decline and rallied to a high of 1.5575 on Monday but has given back most all of its gains this morning. Bank of England Deputy Governor Charles Bean held a dovish outlook for future policy at Jackson Hole and said “further policy action may yet be necessary to keep the recovery on track” as the private sector remains weak, and continued to see a “considerable margin of spare capacity” within the real economy as households and businesses face tightened credit conditions. However, as board member Andrew Sentance dissents against the majority and sees scope to slowly lift the interest rate off its lows, there could be a growing split within the MPC as policy makers aim to mitigate the risks for the economy. Data re¬leased yesterday showed the biggest drop in the Hometrack’s Housing survey in 16 months and a sharp uptick in the GfK consumer confidence survey. That being said, the BCC’s forecasts took top spot. The group pro¬jected a hold on BoE rate until 2011 and five-year average growth of 2 percent.
DATA—GBP M4 Money supply MoM/YoY, GBP Mortgage approvals (JUL)
Euro:
Euro traders ignored good data yesterday and chose to focus on possible extra stimulus measure by the ECB at its monthly meeting scheduled for Thursday. The single currency dropped against most of the majors despite a slew of positive data being released. Trying to support the Euro was the 29-month high in European Commission’s economic confidence survey and 32-month high from its consumer sentiment reading. However taking top spot on the minds of traders was the Financial Times’ article that quoted unnamed sources with sug¬gesting the ECB would likely extend its emergency stimulus program into 2011. Speculation that European offi¬cials are going to follow the same stimulus path as the US and Japan speaks to the market’s concern for the region and state of global finances.
DATA—GER Unemployment Rate (AUG), EZ CPI Estimate, EZ Unemployment rate (JUL)
General:
Japan promised a host of measures on Monday in a bid to ignite its faltering economy and temper a punishingly strong yen. But analysts called the measures too timid in the face of the problems plaguing Japan’s export-oriented economy. A yen that has paradoxically surged to 15-year highs despite weaknesses in the country’s economy, coupled with the damaging phenomenon of falling prices known as deflation. The yen rose to 84.67 against the dollar.
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| GBP/USD | 1.5411 |
| GBP/EUR | 1.2173 |
| EUR/USD | 1.2658 |
| GBP/JPY | 129.75 |
| GBP/AUD | 1.7233 |
| GBP/NZD | 2.2065 |
| GBP/ZAR | 11.37 |
| GBP/CHF | 1.5733 |
| GBP/CAD | 1.6340 |
| GBP/SGD | 1.6340 |
| GBP/THB | 47.98 |
| GBP/HKD | 11.99 red-down; blue-up (snap shot) |
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John Paul Georgiou
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j \n ohn.georgiou@voltrexfx.com