US Dollar Finally Falls From Nearly 8-Month Highs

[DailyFx]

• US Dollar: Finally Falls From Nearly 8-Month Highs
• Euro Bounces as Investor Outlooks Improve
• British Pound Awaits BOE Meeting Minutes



US Dollar Finally Falls From Nearly 8-Month Highs
The US dollar tumbled across the majors, especially against high-yielders, as the currency remains vastly overbought. Indeed, we’ve been saying for days that the extensive dollar rally was due for a retracement, and the move finally came despite the release of mixed economic data. First, the US producer price index jumped 1.2 percent in July, pushing the annual rate to a 26-year high of 9.8 percent. As usual, the bulk of this increase was due to energy and commodity costs, as the core measure rose 0.7 percent during the month to bring the annual rate up to 3.5 percent. However, the dollar’s reaction was relatively muted, as the markets are already well aware that inflation is a problem in the US, given the jump in US CPI last week to a 17-year high of 5.6 percent. Furthermore, recent commentary by Federal Reserve officials suggests that the central bank will opt to leave rates steady this year in an effort to allow an economic slowdown to cool price pressures.

Meanwhile, US housing starts fell more than expected to a 17-year low of 965K in July while applications for building permits slumped to 937K from 1138K. As we saw in Monday’s release of the NAHB index, homebuilder sentiment has been particularly pessimistic as they are faced with the reality of excess home inventories and weakening demand. Overall, it is clear that the housing recession is far from over, and with home values likely to continue falling the outlook for financial institutions remains bleak.

Euro Bounces as Investor Outlooks Improve

British Pound Awaits BOE Meeting Minutes

Commodity Dollars Gain On Oil, Gold – Canadian Dollar Faces Retail Sales

Emerging Markets – South African GDP Rebounds, Mexican Peso Could Slip On Wednesday








Written by Terri Belkas, Currency Strategist for DailyFX.com
E-mail: tbelkas@dailyfx.com