The Euro remained almost exactly flat off of Friday’s close, dropping 15 points to $1.3649. British pound price action was slightly more eventful, as cable initially rallied to $2.0194 before coming back down to $2.0139 through the afternoon. The Japanese Yen remained the strongest performer through the afternoon, as the firmer dollar dropped ¥.25 to ¥116.13 through time of writing.
Disappointing US housing data was unable to move major currency pairs, with
Existing Home Sales showing the largest inventory of unsold homes in 16 years. A
0.2 percent drop in transactions through July was better than median forecasts
of a 0.9 percent decline, but it was nonetheless clear that the trend remains
towards a larger inventory overhang in the domestic housing market. Many claim
that the negative impact of the housing slowdown will spread to the broader
economy, forcing unemployment rates to rise and hurting consumer demand.
Given fast-rising mortgage rates, it seems increasingly plausible that
the housing recession will spread to other sectors of the economy. Combined
with recent market turmoil, the US Federal may have little decision but to cut
its central Fed Funds rate through its upcoming meeting. Fed Funds futures show
a 96% chance of such a rate cut through the bank’s September meeting and a
cumulative 50 basis points in cuts through December. All else remaining equal,
this will leave trends towards dollar selling through the medium term.
Domestic equity markets proved similarly indifferent to the morning’s
disappointing housing data, with the Dow Jones Industrial Average remaining
largely unchanged in the moments to follow. The closely-monitored index
fluctuated through the day’s trade, moving 23 points lower to 13,355 an hour
ahead of the close. The S&P 500 was not quite as fortunate, however,
shedding 0.6 percent to 1,470. Meanwhile, the tech-heavy NASDAQ Composite lost
0.3 percent at 2,568.
Treasury markets were unsurprisingly higher on the Dow Jones slide, with
the benchmark 10-Year Treasury Note 3/16 points improved to 101 and ¼. Yields
fell a relatively minor 2 basis points to 4.59 percent.
Written by David Rodriguez, Currency Analyst for DailyFX.com
DailyFX provides forex news on the economic reports and political events that influence the currency market.
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