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Dollar shrigs off poor data and rises on safety flows

USD

The dollar appreciated on Tuesday as fresh concerns over a deal for Greece led to a sudden boost in dollar-safety buying, which offset lower-than-expected Durable Goods data.

Durable Goods Orders in May declined by -1.8% from a previous -1.0% (revised down to -1.5%), when investors had been expecting a -1.0% fall.

Durables Ex big price-tag transport hardware orders rose 0.5% in line with analysts estimates, and higher than the -0.3% previously recorded.

Other data showed the House Price Index mom in April flat-lined and Manufacturing PMI disappointed to the downside, coming out at 53.8 versus the 54.1 expected, from 54.0 previously. However, these poor results only led to a slight rebound in the greenback, which remained higher.

The currency was given a further boost later in the day after the release of New Home Sales showed a 2.2% rise in May, beating estimates of 1.2% but lower than the 8.1% of April. Taken together with the strong Existing Home Sales print yesterday the data helped the dollar reassert its flagging up-trend into the ‘meat’ of the U.S session.

EUR

The euro broke lower, moving under key support as concerns of a political backlash from Prime Minister Tsipras’s own party, many of whome were annoyed by last minute austerity concessions raised doubts about the political slack with which Greek negotiators could formulate a deal palatable to institutional creditors.

Nevertheless commentators pointed out that even if some of his own party turned against him support from the opposition and the majority of the Greek people – who by a clear majority wish to remain in the euro-zone – would probably outweigh their rebellion, giving him a mandate to negotiate nd manoeuvre for a deal.

Even with a agreement in sight to save Greece many investors may also have been bracing themselves for a sovereign bond haircut which would probably inevitably form a part of new bailout deal – leading to to a bit of a ‘lose-lose’ scenario for the euro.

Officials from the Euro-zone institutions said that the new proposals put forward by Greece had come 90% of the way to addressing creditor concerns. It remained now for talks to discuss and iron out ‘technicalities’. E.U Commission President Jean-Claude Junckers said he felt a deal would almost certainly be achieved by the end of the week. Angela Merkel was more subdued, saying that much ground still needed to be covered.

On the data front, Euro-zone Manufacturing PMI beat expectations, coming out at 52.5 from 52.2 expected. Services PMI came out higher than forecast art 54.4 – as did Composite which rose to 54.1 in June. Although these were preliminary results they continued the trend in strong data for the the euro-zone, which has characterised the first half of 2015.

GBP

The pound sank on Tuesday as a combination of data and risk flows weighed.

Figures from the Consortium of British Industry (CBI) showed a dramatic fall in Total Orders to -7 in June as well as Trends Selling Prices which also fell to -7. These negative results compared badly with positive ones in the month of May before.

There was little other data from the U.K, and its performance was largely determined by risk flows which favoured a flight to safety – that is into the dollar and yen, as a backlash within Syriza fuelled fears Tsipras might be undermined just as negotiators were on the cusp of sealing a deal.

A recent higher-than-expected rise in average earnings helped propel the pound higher in the preceding weeks against most counterparts. Strong Retail Sales results further supported the currency, leading to speculation the BOE could introduce a rate hike earlier-than-previously expected. The convergence on the expected timeline of central bank tightening with the dollar, for example, has helped the recovery in the pound.

JPY

The yen weakened further on Tuesday versus the dollar and was trading at 123.88 late in the New York session a loss of 50 points from yesterdays close.

Yesterday the BOJ’s monthly report on recent economic and financial development stated that the Japanese economy would continue to recover moderately and pointed out that the pace of recovery will be significantly affected by the scenarios of the debt problem in Europe and the momentum of the US Economic recovery.

Earlier today data released showed that Japan’s preliminary manufacturing PMI fell into contraction territory after the index eased to 49.9 in June, lower than market expectations of a drop to a level of 50.5. In the prior month the manufacturing PMI had recorded a reading of 50.9.

USD

The dollar appreciated on Tuesday as fresh concerns over a deal for Greece led to a sudden boost in dollar-safety buying, which offset lower-than-expected Durable Goods data.

Durable Goods Orders in May declined by -1.8% from a previous -1.0% (revised down to -1.5%), when investors had been expecting a -1.0% fall.

Durables Ex big price-tag transport hardware orders rose 0.5% in line with analysts estimates, and higher than the -0.3% previously recorded.

Other data showed the House Price Index mom in April flat-lined and Manufacturing PMI disappointed to the downside, coming out at 53.8 versus the 54.1 expected, from 54.0 previously. However, these poor results only led to a slight rebound in the greenback, which remained higher.

The currency was given a further boost later in the day after the release of New Home Sales showed a 2.2% rise in May, beating estimates of 1.2% but lower than the 8.1% of April. Taken together with the strong Existing Home Sales print yesterday the data helped the dollar reassert its flagging up-trend into the ‘meat’ of the U.S session.

EUR

The euro broke lower, moving under key support as concerns of a political backlash from Prime Minister Tsipras’s own party, many of whome were annoyed by last minute austerity concessions raised doubts about the political slack with which Greek negotiators could formulate a deal palatable to institutional creditors.

Nevertheless commentators pointed out that even if some of his own party turned against him support from the opposition and the majority of the Greek people – who by a clear majority wish to remain in the euro-zone – would probably outweigh their rebellion, giving him a mandate to negotiate nd manoeuvre for a deal.

Even with a agreement in sight to save Greece many investors may also have been bracing themselves for a sovereign bond haircut which would probably inevitably form a part of new bailout deal – leading to to a bit of a ‘lose-lose’ scenario for the euro.

Officials from the Euro-zone institutions said that the new proposals put forward by Greece had come 90% of the way to addressing creditor concerns. It remained now for talks to discuss and iron out ‘technicalities’. E.U Commission President Jean-Claude Junckers said he felt a deal would almost certainly be achieved by the end of the week. Angela Merkel was more subdued, saying that much ground still needed to be covered.

On the data front, Euro-zone Manufacturing PMI beat expectations, coming out at 52.5 from 52.2 expected. Services PMI came out higher than forecast art 54.4 – as did Composite which rose to 54.1 in June. Although these were preliminary results they continued the trend in strong data for the the euro-zone, which has characterised the first half of 2015.

GBP

The pound sank on Tuesday as a combination of data and risk flows weighed.

Figures from the Consortium of British Industry (CBI) showed a dramatic fall in Total Orders to -7 in June as well as Trends Selling Prices which also fell to -7. These negative results compared badly with positive ones in the month of May before.

There was little other data from the U.K, and its performance was largely determined by risk flows which favoured a flight to safety – that is into the dollar and yen, as a backlash within Syriza fuelled fears Tsipras might be undermined just as negotiators were on the cusp of sealing a deal.

A recent higher-than-expected rise in average earnings helped propel the pound higher in the preceding weeks against most counterparts. Strong Retail Sales results further supported the currency, leading to speculation the BOE could introduce a rate hike earlier-than-previously expected. The convergence on the expected timeline of central bank tightening with the dollar, for example, has helped the recovery in the pound.

JPY

The yen weakened further on Tuesday versus the dollar and was trading at 123.88 late in the New York session a loss of 50 points from yesterdays close.

Yesterday the BOJ’s monthly report on recent economic and financial development stated that the Japanese economy would continue to recover moderately and pointed out that the pace of recovery will be significantly affected by the scenarios of the debt problem in Europe and the momentum of the US Economic recovery.

Earlier today data released showed that Japan’s preliminary manufacturing PMI fell into contraction territory after the index eased to 49.9 in June, lower than market expectations of a drop to a level of 50.5. In the prior month the manufacturing PMI had recorded a reading of 50.9.



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