[B]Talking Points
• Japanese Yen: Consolidating At 110.20
• Swiss Franc: Retail Sales Slowed More Than Expected
• Euro: Trade Deficit Widened to Most In Almost Two Years
• British Pound: Housing Prices Continue to Fall
• US Dollar: Housing Data on tap[/B]
Euro Fails At 1.4770, As Trade Balance Remains In Deficit
After firming through the Asian trading session the Euro ran into resistance at 1.4770. The pair failed a number of times to break through the price level despite the dollar weakening on higher oil prices, which rose at one point above $115. Crude would eventually give back its earlier gains and send the pair down to 1.4720. Eurozone trade balance numbers showed the region’s deficit widened to 3 billion Euros an seasonal adjusted basis, which was the highest in almost two years
European exports continue to suffer at the expense of the Euro’s strength, which pushed the trade shortfall higher from May’s 1 billion. Imports rose twice as fast as exports which created the largest deficit since August 2006. Germany was the only country to show a surplus greater than a billion at 7.8 billion, as the regions largest economy has been the main source of growth. Considering Germany has seen its manufacturing and service sectors march toward contraction and its labor market losing 20,000 jobs in July, the rate of contraction in Europe may accelerate considerable in the second half of the year, putting pressure on the ECB to abandon their price stability mandate.
The U.K. housing market continues to deteriorate as house prices fell another 2.3% according to Rightmove, which has the pound trading soggy after breaking above 1.8700. The BOE is expected to have to lower interest rates in the near term in order to prevent the country from entering into a recession.
The U.S. calendar is empty with the exception of the second tier NAHB housing market index. The indicator is expected to remain unchanged from July which will be a welcome sign for traders which have been waiting for the housing market to stabilize. However, tomorrow’s housing starts and building permits data will give us a better measure of its current state. The expected decline in new construction has started to weigh on the dollar along with oil prices showing signs of firming.
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