Despite a barren economic calendar, the Euro fell to nearly a six month low when it touched the 1.4700 handle. Dollar bulls got a boost from U.S. inflation rising to 5.6% and a report from Goldman Sachs that proclaimed the dollar had bottomed.
[B]Talking Points
• Japanese Yen: Breaks Above 110.50
• New Zealand Dollar: Retail Sales Rise 0.9%, But Fall Minus Inflation
• Euro: Tests 1.4700 For First Time in Almost Six Months
• British Pound: Falls To 2-year Low
• US Dollar: U. of M. on tap[/B]
[U][B]Euro Touches 1.4700, As Pound Falls To 2-Year Low[/B][/U]
Despite a barren economic calendar, the Euro fell to nearly a six month low when it touched the 1.4700 handle. Dollar bulls got a boost from U.S. inflation rising to 5.6% and a report from Goldman Sachs that proclaimed the dollar had bottomed. The Sterling pound also saw continued weakness due to the same factors falling to a two-year low as it broke below 1.8550. The greenback’s gains may continue as there is no reason for dollar bulls to abandon their position with Europe heading for a recession and the outlook for interest rates is heading lower for both the ECB and BOE.
The dollar also continues to be the beneficiary of falling commodity prices as gold dropped under $800 for the first time since December and oil was below $113 per barrel. The greenback’s strength and lower crude has spurred risk appetite which has pushed the USDJPY above the 110.50 price level for the first time since January 2.
New Zealand was the only country reporting significant economic data during the overnight session as its retail sales report crossed the wires. June sales rose 0.9% led by automobile and fuel purchases. However, the quarterly report stripped of inflation showed consumption falling to a 13 year low which would add further weakness to the New Zealand dollar and send the pair below 0.6950.
The University of Michigan’s consumer confidence survey, industrial production and empire manufacturing are due for release today. Considering inflation has risen above 5.6% and the job market continues to weaken with jobless claims maintaining above 400,000 for a fourth week, the expected improvement in consumer sentiment could add to the current bullish dollar story. Meanwhile manufacturing is expected to remain flat as global demand slows and a strengthening dollar curbs demand for U.S. goods. However, a drop in manufacturing and weakening consumer confidence could lead to the beginning of the end of the current dollar rally.
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