Forexlive Americas FX news wrap: Powell II, CPI a bit higher. Claims strong. Other Fed speakers weigh in Author: Greg Michalowski | Category: News
Forex news for NY trading on July 11, 2010
- US stocks end mixed in trading today. Dow/S&P closes at record highs. Nasdaq closes lower.
- Barkin to Reuters: He can see the case for an insurance rate cut
- More from Fed's Williams: Arguments for adding policy accommodation have strengthened
- US crude oil futures settle at $60.20
- US monthly budget statement for June -$8.5B vs -$7.9B estimate
- Feds Quarles: There are some significant risks
- Bostic: Economic storm clouds are not actually generating the storm yet
- Fed's Williams: Current picture is complex, but the economy is in a good place
- Gold tests 200/100 hour MAs. Look for support buyers
- More Barkin: If you decide to do something on rates, better to move faster than slower
- More Bostic: Clear risk to economy have increased since a year ago
- US auctions 30 year bonds at high yield of 2.644%
- Fed's Barkin: Not seeing inflation as trigger for more accomodation
- Atlanta Fed's Bostic: Recent low readings on inflation are "noisy"
- Fed's Powell: Businesses are starting to hold back on investment
- European indices end session mixed /little changed
- More Powell: Lessons from Japan is don't get behind the curve and let inflation drop
- Powell does not see corporate leverage rising to systematic risk level
- Fed's Powell: Comments on sever weather risks
- German economic minister Altmaier: Important to avoid escalating trade tensions
- Powell: US economy in very good place but uncertainties weigh
- IMF: Euro zone may face prolonged period of anemic growth and inflation
- Fed Powell Q&A begins in the Senate
- Fed's Barkin: Risks are tilted a bit more to the downside
- Boris Johnson has enough votes to win the PM runoff over Jeremy Hunt
- White House Kudlow: It does look like the Fed will cut rates
- US initial jobless claims 209K vs 221K estimate
- Canada new housing price index for May -0.1% versus 0.2% estimate
- US CPI for June 1.6% YoY vs 1.6% est. Core YoY 2.1% vs 2.0% estimate
- The GBP is the strongest and the USD is the weakest as NA traders enter for the day
In other markets a snapshot of prices are showing :
- Spot gold is down $-12.79 or -0.92% at $1405.93. The higher dollar has helped the price of gold move lower. The contract did find support near the 100 and 200 hour MAs between $1402.73 to $1406 area, but is back into that support area near the day's end (see post here). Holding is more bullish. Moving below the $1402.73 (and staying below) would be more bearish
- WTI crude oil futures are trading near unchanged levels at $60.44
- Bitcoin on Coinbase is trading down $-105 at $11,664.41. The high reached $12,201. The loan extended to $11,169.36.
The US stocks closed with mixed results. The Dow and S&P are closing higher with both indices closing at record highs. The S&P could not sustain the price above the 3000 level for the 2nd day in a row, but the close at 2999.91 is as close as you can get to the natural key target. The Dow moved about the 27,000 level for the 1st time ever. It closed near the highs for the day. European shares closed mixed today with Italy, Spain and Portugal higher and Germany, France and the UK lower.
In the US debt market yields moved higher on the back of better data in the US and a pretty bad 30 year auction. The tail for the auction was 2.6 bps, the bid to cover was low and primary dealers were forced to step in and take a higher percentage of the issuance. The 30 year yields is up 8.4 basis points on the day.
The forex market in the NY session opened with the USD as the weakest of the majors for the 2nd consecutive day. Yesterday, the Fed Chair hinted of a rate cut (and maybe more – most likely dependent on much weaker data between now and the end of the month). The expectations for 50 bps in July was around 25%. However, the CPI was touch strongeer with the ex-food and energy up 2.1% (and above the 2.0% target). The headline was a different story at 1.6% vs 1.8% last, but came in as expected. The jobless claims, meanwhile, were better than expected at 209K. Jobs data continue to support a tight labor market. As a resultl, some of the 50 bp cut pricing came out of the market.
The combination started to strengthen the dollar, move rates higher and send the price of gold back lower.
At 10 AM ET, Fed's Powell started day 2 of his testimony on Capitol Hill and he did keep the door open for a hike. However, he and a host of other Fed members (Barkin, Bostic, Quarles) all spoke to the risks and uncertainties, but the attitude seems to be more focused on the "insurance cut" right now at least.
- Case for a rate cut based on re-centering inflation doesn't feel strong enough
- Economic storm clouds are not actually generating the storm yet
- His district businesses do not say that trade tensions are affecting their business that much
- US economic data in a very strong position
However, they also spoke of the risks to inflation/growth/business spending.
Perhaps Powell summed it up best saying:
- Lessons from Japan is don't get behind the curve and let inflation drop below 2%
- Important to defend the Fed's 2% symmetric goal and WE WILL
Fed's Williams (perhaps the next most important member being the Pres. of the NY Fed) had a list of more dovish statements (see post here)
- Uncertainties around the trade, global growth have not improved (dovish)
- He does not see uncertainties shifting in a positive direction (dovish)
- Market expectations of rate cuts are showing up in easier financial conditions (dovish)
- Data suggest that labor markets are not as tight as they used to believe (dovish)
- He has lowered his view of the natural employment rates (fit to dovish
- Issues facing Fed include uncertainties around the US economy, growth going forward, inflation below goal (dovish)
- He is watching inflation carefully, including possibility of inflation expectations falling (neutral with dovish slant)
- Not seeing upward pressure on wages, inflation (dovish)
- He sees US interest rates as neutral (neutral)
So 25 basis points seem to be the target. The question is does the data tilt more to the downside or does the strong job market, offset the headwinds from trade, global market.
EURUSD: The EURUSD moved higher earlier in the session but lost steam after the better CPI and US jobs data. The price decline took the pair back to the 100 day MA at 1.1254. The price traded above and below that MA (mostly below) during most of the NY session. The lower for the day reached 1.1244. The high after the initial fall, could only get to 1.1262. The 200 hour MA is moving lower and nearly converged with the 100 day MA (at 1.12566 currently). Those two moving averages should act as a barometer in the new trading day. Move above is more bullish (with momentum). If the price continues to stay below, we could see buyers give up and move back toward the 100 hour MA at 1.12292
GBPUSD: The GBPUSD also moved higher into the NY open, but lost nearly all the gains post the US data. The 200 hour MA was broken to the upside for the 1st time since January 1st (currently at 1.2547), but stalled at the 38.2% of the move down from the June 25 swing high at 1.25703. Failure to breach that level and subsequent move below the 200 hour MA, turned buyers to sellers. The fall did not slow until the pair approached its 100hour MA at 1.2503 (low reached 1.2508 in the NY session. With the pair trading below the 200 hour MA at 1.2547 and the 100 hour MA at 1.25033, those "goal posts" will be the support and resistance in the new day. Breaks below or above the extremes should see more momentum in the direction of the break.