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Daily Currency Analysis
EUR/US$
The dollar pushed to a peak of 1.4130 against the Euro in Asian trading, but was unable to sustain the gains and weakened back to around the 1.42 level in early Europe as markets were unable to break major technical levels.
The PMI Euro-zone data was slightly firmer than expected with the manufacturing index rising to 46 from 42.6 the previous month with a more subdued improvement in the services index. The German IFO index rose to 87.3 for July from 85.9 previously which was slightly above expectations and provided some support to the Euro.
The revised University of Michigan consumer confidence data recorded a slight increase from the provisional figure, but it was still below the June reading. The data did not have a significant impact with degrees of risk appetite still very important for the currency markets.
The dollar again strengthened to beyond 1.42 against the Euro, but was unable to regain any momentum. The Euro pushed back above the 1.42 level later in US trading as Wall Street bounced from initial lows and there were gains in commodity prices.
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Yen
The yen was able to resist further selling pressure on Friday with the dollar retreating back to below the 95.0 level. There was evidence of increased dollar sales by exporters which curbed US currency support. Asian equity markets were still strong during the day which helped underpin risk appetite.
There has been evidence of capital flows into high-yield assets and the series of investment trust launches over the next few days will be watched closely to assess the demand for overseas currencies. Markets will still want to take a positive attitude towards risk which will also tend to curb yen support.
The dollar consolidated around the 94.80 level in the US session with neither currency able to make a decisive break while the Euro looked to consolidate above the 134 level.
Sterling
Sterling edged slightly weaker in early Europe on Friday with some nervousness ahead of the latest economic data.
The second-quarter GDP data was significantly weaker than expected with a further 0.8% contraction for the three-month period compared with expectations of a 0.3% decline and this followed the 2.4% decline the previous quarter.
There will still be expectations of a recovery over the second half of the year, but the data will tend to undermine confidence. In particular, there will be increased fears over the government debt outlook as a prolonged downturn would create further fiscal stresses.
Sterling dipped to lows below 1.64 against the dollar following the data, but the improvement in risk appetite helped prevent further losses.
Swiss franc
The dollar tested resistance levels just above 1.0750 on Friday, but struggled to make any strong headway and weakened back to below 1.07 in New York The Euro looked to edge stronger against the franc during the day.
The Swiss currency will still tend to lose support when there is an improvement in risk appetite. There will be further speculation over intervention to weaken the franc if the US currency threatens to break the 1.06 technical support area.
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Australian dollar
Following the sharp decline in late US trading on Thursday, the Australian currency stabilised on Friday. There is still strong evidence of buying support on dips and the currency edged higher again on Friday. There will be further speculation that the Reserve Bank will intervene to sell the currency at higher levels and curb further gains.
Overall sentiment will remain broadly firm in the short term and the Australian currency pushed back to the 0.8180 level in New York on Friday.
Tags:forex, currency, australian-dollar, swiss-franc, sterling, yen, euro, u-s-dollar
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