by Darrell Jobman, Editor-in-Chief


The dollar was confined to narrower ranges during Thursday as markets were unable to break significant technical levels. The US currency was still unsettled by speculation that there would be a shift away from the dollar as exposure to agency bonds was reduced following the stresses in the mortgage finance companies.

The dollar did, however, gain some support from stronger than expected results from JP Morgan which eased financial fears slightly, although there were still serious underlying difficulties.

The US housing data was stronger than expected with starts rising to an annual rate of 1.07mn in June from 0.98mn the previous month. The data was distorted by new regulations in New York which pushed up starts and the underlying data was still relatively weak, but there will be some optimism over stabilisation within the sector with permits also higher.

The Philadelphia Fed survey edged higher over the month, but it was still stuck firmly in negative territory at -16.3 for the month from -17.1 previously. Elsewhere, jobless claims were at 360,000 in the latest week from 346,000 previously, but this was lower than expected and continuing claims were also lower than expected which suggests some stabilisation in the labour market.

ECB member Wellink took a tough approach on inflation in comments on Thursday with comments that inflation would not necessarily decline even if there was a slowdown in the economy. The firm ECB stance will underpin Euro support, although there will continue to be the threat of capital outflows. The dollar tested levels stronger than 1.58 in New York, but then weakened after headline losses from Merrill Lynch.

Source: VantagePoint Intermarket Analysis Software


The yen was unable to regain any momentum in Asian trading on Thursday as equity markets strengthened and risk appetite remained firmer with the dollar finding support below the 104.80 level.

Domestically, the monthly Tankan business sentiment index weakened to a fresh 5-year low of -10 for July from -2 for June which will maintain concerns over the growth outlook, although the impact is likely to be limited given the concentration on international market conditions.

The dollar strengthened sharply to highs around 107.10 in US trading as all Street attempted to rally again while the yen also depreciated sharply against the Euro. Weaker than expected US earnings data pushed the dollar weaker late in US trading and volatility is likely to be a key short-term feature.


The UK currency was slightly weaker against the Euro during Thursday as Sterling hit further tough resistance close to the important 0.79 level. There were further fluctuations around the 2.00 level against the US dollar with no clear direction.

With no major domestic data releases, markets were still considering the inflation and employment data from earlier in the week.

MPC member Sentance stated that he was struck by the speed of the inflation rise seen over the past few months and that there was no convincing evidence that the economy was slowing faster than assumed in the May Bank of England inflation report.

The rhetoric suggests that he may be push for an interest rate increase which will provide some Sterling support, although there will still be a lack of confidence in the economy with uncertainty at very high levels.

Swiss Franc

The Swiss franc weakened steadily against the Euro during the day. The currency dipped to lows around 1.62 and also fell to 1.0250 against the dollar.

Immediate demand for the Swiss currency remained lower as risk appetite recovered while a further decline in oil prices also helped underpin undermine the franc. A sustained drop in energy prices could be very important in triggering a structural reduction in short-term franc demand.

Global stock markets also advanced over the day, although the main US indices encountered some resistance after sharp gains the previous day and the franc regained ground late in New York trading.

Source: VantagePoint Intermarket Analysis Software

Australian dollar

The Australian dollar was unable to regain the 0.98 level against the US currency during Thursday. There were no major domestic developments, although there were some underlying fears over the housing sector which curbed enthusiasm for the currency to some extent.

There is still scope for investment inflows on yield grounds which will provide important support, especially with a persistent weight of funds from Japan.

A firmer US currency tone and renewed decline in commodity prices pushed the Australian dollar down to test levels below 0.97 in New York.