Strong US Durable Goods Orders Gives Dollar Bulls Further Ammunition this Week, Risk Appetite Returns

Daily Forex Fundamentals | Written by CMS Forex | Jul 26 08 06:01 GMT |

JPN National Consumer Inflation Continues to Rise on Energy, Toyko CPI Undershoots Forecasts Japan's national consumer price index for June rose 2% compared to last year. It was the fastest pace in 10 years. Inflation excluding food was up 1.9%. Looking at inflation minus both food and energy, prices were up 0.1%. It's easy to see that consumers are paying more for gas and electricity. In a measure of consumer inflation around the Tokyo area, which leads the national survey by one month prices were up 1.6%, lower than expected. CPI excluding food and energy was also lower than forecast. JPN Corporate Service Price Index Rises 1.2% Year over Year in June The prices that Japanese corporations pay for services rose 1.2% in June compared to last year. May's figure was revised up as well. Transportation led the increase, climbing 6.2% even as other services like communications and advertising were down for the year. UK 2nd Quarter GDP Slows to 0.2%, Worst in 7 Years In the UK, GDP growth in the second quarter met expectations of a 0.2% quarterly increase and a 1.6% increase on a year-over-year basis. The quarterly change is the slowest pace in 7 years. The troubles that started with the financial turmoil and a housing correction have now seeped into the banking, construction and manufacturing sectors. GBP/JPY - Pound Pares Yesterday's Looses vs Yen The Pound-Yen pair fell sharply during yesterday's session and continued falling to start today's global session on the back of weaker global stocks. Risk appetite returned prior to the NY open and the pair surged almost 270 pips from its intra-day low. This put the pair back above the level at which it started the week. Positive results from the US helped spur a rally in US stocks in today's session. US Durable Goods Orders Increase 0.8%, Beating Expectations Orders for durable goods surprised on the upside, increasing 0.8%, a positive piece of news that shows US manufacturers doing better than expected. Orders excluding transportation were up 2%, the highest this year. US New Home Sales Better Than Expected Last 2 Months Sales of new homes were down 0.6% this month, but only because the figures for the month of May were revised up modestly. For June, the annual pace of new home sales was 530K, better than expectations. US UMich Consumer Sentiment Improves to 61.2, Surprises Forecasts The UMich consumer confidence index surprised forecasts and improved to 61.2 for July's revised version. It was at 56.6 in the preliminary release. Both current and future expectations saw an increase though the gains may be a temporary bounce as consumers may have at first overestimated how poor conditions were. EUR/USD - Strong Durable Goods Orders Boosts Dollar in Today's Trading The Euro-Dollar pair gained overnight on hawkish comments from a member of the ECB Council who said that the bank still had room to raise rates this year. The Euro tested 1.5750, but reversed course after the US orders data. The pair fell to trade near 1.57 by mid afternoon. The week has seen a strong swing in favor of the Dollar. European fundamental data was quite poor, oil prices kept falling and the crisis surrounding Fannie Mae and Freddie Mac seemed to be alleviated by a government bailout. USD/JPY - US Stocks Show Positive Signs, and Risk Appetite Returns After a very brutal Thursday session on Wall Street, today's positive US fundamental releases helped spur a rally. The Dollar-Yen pair pared its overnight losses and was back at the 108 level which has acted as resistance recently. USD/CAD - Loonie Sinks This Week on Retail Sales, Falling Oil The US Dollar-Canadian Dollar broke above another level of resistance at 1.0150 today, climbing to test the area near 1.02. That's a 200 pip swing since the pair tested parity on Tuesday. Falling oil prices and a weaker than expected retail sales report on Tuesday have been the main catalysts for the weakness in the Canadian Dollar. USD/ZAR - Return to Carry Trade Boosts Rand in Friday Trading The US Dollar-South African Rand pair had a topsy-turvy week. The Dollar gained in the middle of the week on an increase in risk aversion, but with today's increase in risk appetite the Rand pared its losses and was trading back near the 7.59 area. South Africa's interest rate is at 12% currently, making it a key destination for carry trade. Next Week's Releases Important releases next week include GDP and non-farm payroll data from the US, a slew of releases from Australia including retail sales and trade balance, and data on consumer inflation from the Euro-zone. Capital Market Services, L.L.C. www.cmsfx.com ©C2004-2005 Globicus International, Inc. and Capital Market Services, L.L.C. Any information in this report is based on data obtained from sources considered to be reliable, but no representations or guarantees are made by Capital Market Services, L.L.C. with regard to the accuracy of the data. The opinions and estimates contained herein constitute our best judgment at this date and time, and are subject to change without notice. Capital Market Services, L.L.C. accepts no responsibility or liability whatsoever for any expense, loss or damages arising out of, or in any way connected with, the use of all or any part of this report. 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