Dollar Sinks vs Yen as US Stocks Decline, But Dollar Up vs. Other Rivals to End Week

Daily Forex Fundamentals | Written by CMS Forex | Aug 29 08 23:15 GMT |

JPN National CPI Hot in July In Japan, national consumer prices rose above 2% for the first time in a decade. Headline inflation for the July period was 2.3% in annual terms. Core CPI, which exclude fresh food grew 2.4%, faster than the 1.9% in July. JPN Tokyo CPI Cools in Augst Prices for the Tokyo area, which leads the national index by one month, rose 1.3% in annual terms. That was below forecasts, and is lower than the 1.6% rate in July. Excluding food, inflation cooled to a 1.5% rate. JPN Household Spending Better Than Expected, Unemployment Notches Down Household spending in Japan decreased 0.5% in July. Though it's another negative result, it was an improvement on June's 1.8% drop and beat forecasts. The unemployment rate in Japan decreased to 4% in July, also surprising expectations. JPN Retail Trade and Industrial Production Surprise on Upside Retail sales rose 1.9%, which also surprised economists. Even though households are spending less, they are cutting other spending more than retail purchases. Preliminary estimates showed that industrial production climbed 0.9% in July, yet another positive release. AUD/JPY - Aussie Declines vs Yen to End Week The Yen performed strongly against its rivals overnight and at the start of NY trading. The Aussie-Yen pair slid 160 pips from its high yesterday, to set a new low for the week below 93.00. Stocks in the US stumbled in NY trading which helped the yen extend its gains. GBP/JPY - Sterling Sinks 250 Pips vs Yen The Pound-Yen which broke below the 200 level to start the global session, was seriously pressured, dropping 250 pips in today's trading. It's the lowest the pair has been since April. EUR CPI Edges Down to Annual Rate of 3.8%, Preliminary Data In Europe, consumer inflation unexpectedly slowed in August, falling to an annual rate of 3.8% from July's 4.0%. Forecasts had called for no change. It's a sign that prices may have peaked over the summer. EUR Economic Sentiment and Business Climate Weak in August In the Euro-zone the economic sentiment indicator measured 88.8 while the business climate indicators fell to -0.33. Both were lower than expected and are a worrisome sign for the start of the 3rd quarter. US Personal Spending and Income Weak As Rebate Boost Fades In the US, consumer spending, which makes up about 70% of real GDP, cooled in July. Spending was up 0.2%, matching forecasts, after increasing 0.6% in June. Incomes for July dropped 0.7%, the first decrease since August 2005, reflecting the end of the stimulus checks and tax rebates. US Chicago PMI Jumps to 57.9, UMich Consumer Confidence Up to 63 The Chicago PMI increased to 57.9 compared to last month's 50.8. Prices eased from a 28-year high, while new orders and deliveries improved. The final version of UMich consumer confidence improved to 63 in August, up from its preliminary release. Both current conditions and expectations improved compared to the mid-month estimate. EUR/USD - Pressure on ECB Eased With CPI Data, Euro Falls The Euro fell against the Dollar in NY trading, after stalling overnight near 1.4765. Cooler inflation from the Euro-zone pressured the Euro, and it dropped below a recent line of support near 1.47. GBP/USD - Sterling Continues its Decline vs Dollar The Dollar-Pound continued falling, hitting a fresh 2-year low near 1.8170. The Pound has been falling gradually all week and is down 560 pips from its level last Friday. USD/JPY - Dollar Falls Vs. Yen as US Stocks Stumble The Dollar did not fare well against the Yen, as US stocks tumbled to close the week. The Dow Jones fell by triple digits and the Nasdaq index was off 1.8%. The Dollar-Yen pair fell to test 108.40, where it bounced off the line of support. The pair has traded in a downward channel this week. CAN Producer Price Ease in July, Only Up 0.4% In Canada, the PPI inflation cooled to 0.4% in July from the 1.4% seen in June. The fall is primarily a result of a decelerated rise in in petroleum prices during the month. The Raw materials price index was up 1.4%, higher than expectations. CAN GDP For 2nd Quarter Underwhelming, 1st Quarter Revised Down Canadian GDP edged up 0.1% in the second quarter up from a downwardly revised decline of 0.2% in the first quarter. That missed meet expectations and the annualized rate was a meager 0.3%. USD/CAD - Loonie Falls in the Wake of GDP Data The Loonie had been gaining on the greenback prior to the NY open, reaching below 1.05. From that intra-day low, the pair climbed 150 pips with the poor GDP data the main catalyst. Next Week Trading on Monday will be light as the US and Canada celebrate labor day. Four central banks meet next week, Australia, Canada, the UK and the Euro-zone. Only the RBA is expected to shift policy, a 25 basis point cut. The US will release its August ISM indexes for manufacturing and services. Capital Market Services, L.L.C. www.cmsfx.com