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Video for August 26th, 2008 (5 min): Euro Sinks vs Dollar Following Weak German Data, Pound at 2-Year Low NZ Trade Balance Shows Wider Deficit We start in New Zealand where last evening data showed that its monthly trade balance fell into a larger deficit in July. With imports increasing and exports decreasing, the deficit grew to NZ$780 million. NZ Inflation Expectations for 1 and 2 Year Horizon Increases Also in New Zealand, a survey of business managers showed inflation expectations increasing. CPI is expected to be 3.6% in one year, and 3.0% in 2 years time. Those figures were both higher than in the previous survey. Currently inflation is running at 4% and is expected to peak during the 3rd quarter. JPN Corporate Service Price Index at 1.3% Year-over-Year, Declines on Month In Japan, corporations paid 1.3% more for services in July compared to the same time last year. Transportation costs are the main culprit. On the month, prices were actually down 0.1%, a modest decrease from June, and may explain why the headline number was lower than expected. NZD/JPY - Kiwi Falls Following Trade Data, Carry-over From Yesterday's Slide in US Stocks
The Kiwi-Yen pair fell after the New Zealand trade balance release. The pair capped off a 250-pip slide from its high on Friday, and found support near 75.70. Today's data adds to the shaky investor confidence following yesterday's drop in US stocks. In today's NY session the Kiwi rebounded a bit, as US stocks held it together and commodity prices rose. GER Consumer Confidence Decline for Sept., Final GDP Matches Preliminary In the European session, the German GFK Group released another weak consumer confidence report. Consumers are worried about the economic outlook, and a significant drop in crude oil prices did nothing to brighten the mood. Their willingness to buy continues to decline. The final version of Germany's GDP confirmed the preliminary release, which showed a 0.5% decline for the 2nd quarter. GER IFO Business Climate Slides to 94.8, Lowest in 3 Years Germany's IFO business climate index severely undershot expectations, falling to 94.8 for August. The expectations index decreased to 87 from July's 90. It's a poor sign for the economy, and will set alarm bells off in the ECB. EUR/USD - Euro Hits Fresh 6-Week Low vs Dollar Following German Data
The Euro-Dollar pair hit a fresh six-month low following the weak German releases. It raises concerns of recession in the euro-zone and fueled expectations that the ECB may have to factor in reducing interest rates sometime soon. GBP/USD - Pound Falls to 2-Year Low
The Pound-Dollar pair, which has been steadily pressured the last several sessions, hit a new 2-year low at 1.8330. In this long term look, where each candle represents one-week, you see that the Pound has plunged almost 1,500 pips during the month of August. US S&P Case-Shiller See Housing Price Declines Stabilize Home prices in the US's largest cities in June were down slightly from their levels in May. The S&P Case-Shiller 20-city index was down 15.9% compared to a year ago. Forecasts had called for an even bigger decline. The 10-city index showed prices down 17.0% compared to a year ago, again a small change compared to May. US OFHEO House Price Index Down 1.4% for 2nd Quarter, Flat on Month The government's measure of housing prices nationwide showed prices 4.8% lower than last year, with a flat monthly change. For the second quarter, prices were down 1.4%, which was a smaller decline than in the 1st quarter. The two housing prices reports signify that while prices remain at low levels, they seem to be stabilizing. US New Home Sales Disappointing, Large Revisions for June Number The pace of annual new homes sales increased to 515K in July, disappointing forecasts of a 525K rise. June's figure of 530K was revised down to 503K, which made the monthly change a positive 2.4%. US Consumer Confidence Increases, Richmond Fed Remains at -16 Consumer confidence data from the US was upbeat, rebounding to 56.9 in August, from July's 51.9. The Richmond Fed index, which measures the region's business activity in manufacturing remained negative for the 4th straight month. The index matched July's level of -16. USD/JPY - Dollar Holds its Overnight Gains Despite Dipping at NY Open
After its steep fall yesterday, the Dollar-Yen pair managed a steady rally in overnight trading. At the NY open, the Dollar dipped to 109.15 as a surge in oil prices scared markets in the US. However, stocks remained stable and the Dollar recovered to trade near 109.90 following the US fundamental releases. USD/CAD - Loonie Has A Strong NY Open as Oil Prices Surge Before Receding
A surge in oil prices to open the NY session helped boost the Canadian Dollar. The US Dollar-Loonie pair slid 140 pips after testing the 1.0550 level. Oil prices eased in afternoon trading and the greenback recovered some of those initial losses, though some clear resistance has been set near the 1.0420 area. Upcoming Releases It was too late for this broadcast to bring you the FOMC minutes that were released afternoon. Later tonight, Australia will post a quarterly measure of construction, and New Zealand will release a measure of business confidence. Overnight, Germany will reveal its import and consumer price indexes. Tomorrow, the US has just one release, durable goods orders for the month of July. |
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