Greenback and High Yielders Slide as Risk Aversion Sweeps Through Market, US Stocks Sharply Lower

Daily Forex Fundamentals | Written by CMS Forex | Aug 25 08 21:48 GMT |

NZ Food Prices Up 7.6% Compared to Last Year We start our broadcast with some fundamental news from the Asia-Pacific session. In New Zealand, the food price index rose 0.6% in July led by higher prices for fruits and vegetables. On the year prices are now 7.6% higher, with the grocery sub-group up 11%. Consumers, facing these higher prices for food are likely to cut spending in other areas, possible hurting an already wobbly economy. SGP Singapore's Annual Consumer Inflation Slows For First Time in 5 Months In Singapore, the consumer price index was up 6.5% on the year in July, higher than expectations. In June the rate was 7.5%, and it's the first time in 5 months that the annual rate had cooled. Prices reached new 26-year highs in April, May and June, so it may be a sign that inflation has peaked. The central bank sure hopes so. On the month prices were up 0.4%. GBP/USD - Pound Opens By Falling Further, Recovers in European Session After a strong start following Sunday's open, the US Dollar pared its gains overnight. The Pound-Dollar pair was an extreme example of today's action. This pair has been having some wild volatility. From its high near 1.8750 on Friday, it slid almost 360 pips prior to the European open. There it found some support and started a 170-pip rally of its own. In NY trading a positive report out of the housing sector helped the greenback turn the tide near 1.86. The Euro-US Dollar experienced similar price action today, though not with the same volatility as seen here. US Existing Home Sales Surprise Forecasts, Up 3.1% in July US existing home sales surprised forecasts on the upside in July. Sales increased 3.1% to an annual pace of 5 million units, which wipes away June's decrease. The data showed that conditions favor buyers as the median price for an existing home continues to fall and unsold inventories increased. Prices are now down 7.1% compared to last year, but some buyers are waiting even lower prices. USD/JPY - Yen Strengthens as US Stocks Suffer Sharp Losses The Dollar struggled against the Yen on Sunday and overnight, giving up about half of its gains from Friday's session. Today fall was amounted to 120 pips as the Dollar fell to support at 109. The NY session saw sharp losses in US stocks with the Dow index down 200 points at 2 PM as investors worry about oil and the health of the financial sector. EUR/CHF - Turmoil in Credit Markets Reverberates to Carry Trade Pairs The decline in US stocks and deepening credit market concerns had an impact on other pairs linked to "carry trade." The Euro-Swiss Franc pair, after a strong performance last week, slid 80 pips from its Sunday open. Both the Yen and Swiss Franc benefitted from the increase in risk aversion. AUD/JPY - Aussie Falls as Commodities Retreat, Risk Aversion Increases The Aussie and Kiwi were down today as commodity prices dropped and risk aversion reduced the appeal of high-yielders. NY trading saw the pair fall about 100 pips to 94.40. This brings the pair close to its level seen on August 21st and a key point of support for the pair. Upcoming Releases Tonight, New Zealand will release its trade balance and the central bank's projections for inflation. Japan will post an index of prices that companies pay for services. Overnight, Germany releases data on consumer confidence, GDP and the IFO Business Climate index. Also overnight, Switzerland reveals its UBS consumption indicator. Tomorrow, the US releases two measures of housing prices, data on new home sales, the Richmond Fed index, a measure of consumer confidence and the FOMC meeting minutes. 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. No part of this report may be reproduced or distributed in any manner without the permission of Capital Market Services, L.L.C.