Broadly Mixed Dollar in a Mostly Quiet Market

<br /> Broadly Mixed Dollar in a Mostly Quiet Market – Marc to Market<br />


The US dollar is mostly little changed against the major, as
befits a summer session. 
 There are two exceptions.  
The first is
the New Zealand dollar.
  Comments by the central bank’s
governor played down the need for urgent monetary action and suggested that the bottom of cycle may be near 1.75% for
the cash rate, which currently sits at 2.0%. This means that a cut next month is unlikely.  November
appears to be a more likely timeframe.  
The second
exception is sterling, which is extending its data-induced recovery. 
 It has been bid
through $1.3200 for the first time since August 4, but the intraday technicals
look vulnerable to a setback in North America today.  That said, a close
above the last week’s $1.3175-$1.3185 highs may spur a further correction
toward $1.3350.
The most
interesting data today was the flash eurozone
 The aggregate reading was little
changed.  The manufacturing PMI slipped to 51.8 in August from 52.0 in
July.  The service PMI firmed to 53.1 from 52.9.  The composite ticked up to 53.3 from 53.2, which is
the highest since January.  
The detail were
a bit surprising as German data disappointed, though in fairness, remained
Specifically, the manufacturing PMI eased
to 53.6 from 53.8.  The service sector saw a larger pullback.  Its August reading was 53.3 down from 54.4 in
July.  The composite stands at 54.4 compared with 55.3 previously.
 It matches the June reading.  
The upside
surprise from France was not a function of its manufacturing sector. 
 That PMI slipped to 48.5 from 48.6.  Recall it
averaged 48.2 in Q2.  It was the service sector that exceeded
expectations.  It rose from 50.5 to 52.0.  It is the highest since
last October.  The composite rose to
51.6 from 50.1, which is also the highest reading since last October.
For its part,
the euro recovered fully from yesterday’s slippage toward $1.1270 to return to
approach last week’s highs near $1.1365. 
 The gains were recorded in Asia and
faded in the European morning.  Initial support is seen near $1.1315.  Meanwhile, the two-year rate
differential is drifting a bit higher, though it is yet to translate to better
dollar traction.  
News that
Italy’s largest bank may be near selling its stake in a Polish bank as part of
its effort to strengthen its balance sheet appears to be boosting sentiment. 
 An index of Italian bank shares is up  2.8% to
extend yesterday’s 1.2%, and is now up three of the past four sessions, after
falling in three of four sessions last
week (national holiday on August 15).  
The Dow Jones
Stoxx 600 is gaining 0.8% today, led by materials and financials.
  It is building on yesterday’s gains.
 Last week’s downdraft appears over,
and the market is poised to move higher. Asian share edged higher, with the
MSCI Asia-Pacific Index posting a minor (~0.5%) gain to snap a three-day
hiccup.   It is the second advancing session in the past seven.
The recovery of
the yen proved too much for Japanese shares, which finished lower. 
 The Nikkei has been in a sawtooth pattern,
alternating between advancing and falling for the past six sessions. The dollar
almost reached JPY101 yesterday but could not sustain the momentum.  It
finished the North American session near its lows, and briefly was pushed below JPY100 in Asia.  It has
been better bid in the European morning.    The immediate hurdle is seen near JPY100.40.   BOJ’s Kuroda did
speak as expected but failed to address
monetary policy. Separately, note that the flash manufacturing PMI edged higher
to 49.6 from 49.3.  It is the highest since February, which was the last
time the PMI was above the 50 boom/bust level.   
The Canadian
dollar is trading within yesterday’s ranges. 
 The US dollar was pushed toward
CAD1.2880 in Asia, but has turned better bid in Europe, and returned to
CAD1.2920.  Intraday technicals suggest scope for additional gains within
a consolidative framework.  In contrast, the Australian dollar has
continued to recover from yesterday’s slide that took it to almost $0.7580
 The recovery began in Europe yesterday and continued in North America.
 However, it appears to have run out of steam near $0.7655 today.

The North
American session features the Markit’s flash manufacturing PMI for the US, the
Richmond Fed survey, and new home sales. 
 None of which are market movers.  The focus is
on Yellen’s speech at Jackson Hole.  To the extent that she offers any
insight into the current conditions and monetary policy considerations, it
would be a big surprise if she did not share the general sentiments expressed
by Fischer and Dudley in recent days.  

Broadly Mixed Dollar in a Mostly Quiet Market
Broadly Mixed Dollar in a Mostly Quiet Market

Reviewed by Marc Chandler

August 23, 2016

Rating: 5

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