Euro Tumbles After ECB Hikes Rates, Dollar Mostly Higher

GBP Slumps, AUD Outperforms, China Trifecta Data Next

Summary:

The Euro tumbled below 1.0700 to 1.0645 after the ECB hiked its Main Refinancing Rate by 25 basis points to 4.50%. Persistent inflation amidst weakening growth in Europe weighed on the shared currency. In choppy trade, the shared currency hit an overnight and 3-month low at 1.0632.

Upbeat US PPI and Retail Sales data lifted the Dollar Index (DXY) to 105.33 from 104.73. August Retail Sales jumped to 0.6%, beating expectations at 0.1%. US Producer Prices rose to 0.7% from 0.3%.

Sterling (GBP/USD) slumped 0.64% to 1.2410 (1.2490) amidst broad-based US Dollar strength and a weaker Euro. The British currency was pounded to an overnight and 4-month low at 1.2397.

The Australian Dollar (AUD/USD) outperformed, climbing 0.3% against the Greenback to 0.6440 from 0.6423 yesterday. Australia’s economy added 64,900 jobs in August, while the Jobless rate was unchanged, at 3.7%.

Against the Japanese Yen, the US Dollar edged higher to 147.45 at the close of trade in New York, up a touch from yesterday’s 147.32. Overnight, the USD/JPY pair to 147.56 highs before easing.

The 10-year US treasury bond yield rose to 4.29% from 4.24%. In contrast, Germany’s 10-year Bund yield slumped 6 basis points to 2.59%. The UK’s 10-year Gilt yield was last at 4.27% (4.34%).

The Greenback finished mixed against the Asian and Emerging Market currencies. USD/CNH (Dollar-Offshore Chinese Yuan) edged up to 7.2840 from 7.2750 yesterday.

Against the Singapore Dollar, the Greenback rallied to 1.3630 (1.3610 yesterday). The USD/THB (Dollar-Thai Baht) pair rose to 35.80 from 35.70 yesterday.

Wall Street Stocks rallied. The DOW added 1.04% to 34,943 from 34,583 yesterday while the S&P 500 finished at 4,507, up from yesterday’s 4,475. Other global share markets finished higher.

Other economic data released yesterday saw UK RICS House Prices plummet to -68%, lower than forecasts at -55%. US Claims for Unemployment benefits fell to 220k, better than forecasts at 226k.

EUR/USD – Despite an increase in the Main Refinancing Rate to 4.50% from 4.25% by the European Central Bank, the Euro tumbled to 1.0645 from 1.0700. In volatile trade, the overnight low recorded was 1.0632 while the high traded was 1.0752.AUD/USD – The Aussie Battler outperformed, climbing against the Greenback to 0.6440 against yesterday’s 0.6423. A solid Australian Employment report lifted the Battler. The Aussie traded to an overnight high at 0.6460. The overnight low recorded was 0.6419.USD/JPY – Against the Japanese Yen, the US Dollar settled at 147.45 (147.32 yesterday). The Greenback traded to an overnight high at 147.56 before easing. In subdued trade, the overnight low recorded was at 147.01. USD/JPY kept its bid, supported by higher US yields.GBP/USD – Sterling slumped to 1.2410 from 1.2490 yesterday. In volatile trade, the British Pound traded to an overnight high at 1.2506 against the Greenback before plummeting to 1.2397 lows. The British currency then steadied to its 1.2410 close.On the Lookout:

Today’s economic calendar kicks off with China’s trifecta of August Retail Sales (y/y f/c 3.0% from 2.5%), Industrial Production (y/y f/c 3.9% from 3.7%), and Fixed Asset Investment (ytd/y f/c 3.3% from 3.4%).

All forecasts are from ACY Finlogix. China also releases its August Unemployment Rate (f/c 5.4% from 5.3% - ACY Finlogix).

Japan follows with its July Tertiary Industrial Index (m/m f/c -0.2% from -0.4% - ACY Finlogix).

France starts off Europe with its August Inflation Rate (m/m f/c 1% from 0.1%; y/y f/c 4.8% from 4.3% - ACY Finlogix).

Italy releases its August Inflation Rate (y/y f/c 5.5% from 5.9% - ACY Finlogix).

The Eurozone follows with its July Trade Balance - Surplus (f/c +EUR 20 billion from +EUR 23 billion – ACY Finlogix).

Canada kicks off North America with its Canadian July New Motor Vehicle Sales (f/c 158.0 k from 165.42 k – ACY Finlogix).

The US rounds up today’s economic data releases with its US August Export Prices (m/m f/c 0.4% from 0.7% previously - ACY Finlogix) and US August Import Prices (m/m f/c 0.3% from 0.4% previously – ACY Finlogix), US August Industrial Production (m/m f/c 0.1% from 1%; y/y f/c -0.5% from -0.2% - ACY Finlogix), US August Capacity Utilization (f/c 79.3% from 79.3% - ACY Finlogix).

Finally, the US releases its New York Empire State Manufacturing Index (f/c -10 from -19 ACY Finlogix).

Trading Perspective:

Robust US Retail Sales and upbeat Producer Prices lifted the US Dollar following its fall yesterday.

A dovish hike by the ECB weighed on the Euro and other FX against the Greenback.

Today’s economic calendar is a busy one, with China releases its trifecta of Industrial Production, Retail Sales, and Fixed Asset Investment in Asia today.

China also releases its Jobless Rate. The US releases its New York Empire State Manufacturing Index which is forecast to improve to -10 from a previous -19. Currency traders will keep an eye on that as well.

Expectations that the Federal Reserve is set to continue raising its borrowing cost have put a bid under the US Dollar.

Expect the Greenback to stay bid against its Rivals today until the latest US economic data are released. The caveat once again is a disappointment in US data which could see a pre-weekend US Dollar sell-off.

EUR/USD – Slip-sliding away, the Euro finished on a soft note against the Greenback at 1.0645 (1.0700 yesterday). Look for immediate support at 1.0630 (overnight low traded was 1.0632). The next support level is found at 1.0600 followed by 1.0570. On the topside, look for immediate resistance at 1.0670, 1.0700 and 1.0730 to cap any rallies. Look for more choppy trade in a likely range today of 1.0620-1.0720. Prefer to buy Euro on dips today. (Source: Finlogix.com)

AUD/USD – The Aussie Battler held its own, outperforming other currencies and climbing against the Greenback to 0.6440 (0.6423 yesterday). Look for immediate resistance today at 0.6470 (overnight high traded was 0.6460). The next resistance level lies at 0.6500. Immediate support can be found at 0.6410 (overnight low traded was 0.6419). The next support level lies at 0.6390. Look for a likely trading range today of 0.6400-0.6500. Trade the range today.USD/JPY – Despite a rise in US bond yields, the Greenback settled little-changed against the Japanese Yen to 147.45 (147.32 yesterday). Immediate resistance today is found at 147.70 followed by 148.00. On the downside, look for immediate support at 147.10, 146.80 and 146.30. Look for more choppy trade in this currency pair, likely between 147.00-148.00. Trade the range, nice and wide.GBP/USD – Sterling slid against the broadly based stronger US Dollar to 1.2410 from 1.2490 yesterday. On the day, look for immediate support at 1.2390 (overnight low traded was 1.2397). The next support level lies at 1.2360. On the topside, immediate resistance lies at 1.2440, 1.2470 and 1.2500 (overnight high traded was 1.2506). Look for more choppy trade in the British currency, likely between 1.2390-1.2490. Prefer to buy Sterling dips today.

Happy and trading all. Have a top weekend ahead.

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