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    Strong housing data and hawkish outlook continue supporting the buck

    USD

    The dollar strengthened even further on Friday after broadly positive data supported a hawkish monetary policy outlook.

    Housing Starts increased by 9.4% – the most since 2007, and Building Permits by 7.4% – beating expectations of a negative -8.0% fall, and also showing the sharpest rise for eight years. Often seen as a leading indicator for the economy the U.S housing sector continues to shine.

    CPI data came out in line with expectations, showing a 0.1% rise yoy and 0.3% mom, with Core at 1.8% yoy and 0.2% mom.

    Average Weekly Earnings slightly disappointed by coming out lower than previously at 1.8% in June from 2.2% in May.

    University of Michigan also disappointed to the downside with 93.3 print from 96.1 previously; analysts had been expecting but a basis point fall to 96.0.

    Doveish commentary from Fed Deputy Chair Stanley Fischer may curb hawkish enthusiasm, however, after he said inflation was too low on Friday, showing a shift to a more doveish stance.

    EUR

    The euro bled lower on Friday, but as previously the impetus came more from strengthening counterparts such as the dollar and the pound, which rose on hawkish shift in central bank rhetoric.

    There was little hard data from the euro-zone, and Construction Output actually beat previous figures, by coming out at 0.3% both yoy and mom in May.

    The main news was that the German Parliament passed an 86bn bailout for Greece, by a large majority (400 to 100 ). With the euro-group’s ESM also kicking into play and the 1bn bridging loan agreed yesterday a Grexit seems to have been averted.

    Euro traders may have been subdued, however, by the enormity of the up-hill struggle now facing Greece to reach a position of fiscal strength. The IMF, for one, are sceptical about whether Greece can manage with such a large debt burden, and think a right-off is eventually inevitable.

    GBP

    Sterling kept climbing higher on Friday as traders started to think it might even be possible that the BOE could pip the Fed as the ‘first central bank to tighten.’

    Recent commentary from governor Carney, as well as supporting data, have upped expectations hugely for a rate hike in early 2016 – with the consensus revolving around February.

    The chief of the BOE was very clear about what he and his committee wanted to see before hiking rates – viz higher core inflation, higher labour costs and a rise in economic activity.

    Assuming these happen a rate hike is possibly on the cards. On Friday, data from the U.S was mixed, after Housing Starts and Building Permits showed the quickest rise since 2007 – but this was offset by disappointing wage data which slowed, and a doveish ‘back-lash’ from Fed’s Fischer, who said inflation was too low. The U.K conversely has seen accelerating average earnings, although some of the rise can be attributed to a greater increase in bonuses , not basic pay.

    JPY

    The dollar gave back some of yesterdays gains against the yen as traders booked profits. The yen is flat with domestic holidays on the calender.

    Yesterday the BOJ monthly economic survey indicated that Japans economy has continued to recover at a moderate pace. Furthermore the central bank expects the nation’s economy to continue its moderate recovery trend and estimates the consumer price inflation rate to be around zero percent in the near-term, largely due to the fall of energy prices.

    A Nikkei report due for release on July 21 says the BOJ focus is on October. Economists are evenly divided on whether the central bank will ease further then.

    The yen was trading at 124.04  per dollar late in the New York session on Friday.

    USD

    The dollar strengthened even further on Friday after broadly positive data supported a hawkish monetary policy outlook.

    Housing Starts increased by 9.4% – the most since 2007, and Building Permits by 7.4% – beating expectations of a negative -8.0% fall, and also showing the sharpest rise for eight years. Often seen as a leading indicator for the economy the U.S housing sector continues to shine.

    CPI data came out in line with expectations, showing a 0.1% rise yoy and 0.3% mom, with Core at 1.8% yoy and 0.2% mom.

    Average Weekly Earnings slightly disappointed by coming out lower than previously at 1.8% in June from 2.2% in May.

    University of Michigan also disappointed to the downside with 93.3 print from 96.1 previously; analysts had been expecting but a basis point fall to 96.0.

    Doveish commentary from Fed Deputy Chair Stanley Fischer may curb hawkish enthusiasm, however, after he said inflation was too low on Friday, showing a shift to a more doveish stance.

    EUR

    The euro bled lower on Friday, but as previously the impetus came more from strengthening counterparts such as the dollar and the pound, which rose on hawkish shift in central bank rhetoric.

    There was little hard data from the euro-zone, and Construction Output actually beat previous figures, by coming out at 0.3% both yoy and mom in May.

    The main news was that the German Parliament passed an 86bn bailout for Greece, by a large majority (400 to 100 ). With the euro-group’s ESM also kicking into play and the 1bn bridging loan agreed yesterday a Grexit seems to have been averted.

    Euro traders may have been subdued, however, by the enormity of the up-hill struggle now facing Greece to reach a position of fiscal strength. The IMF, for one, are sceptical about whether Greece can manage with such a large debt burden, and think a right-off is eventually inevitable.

    GBP

    Sterling kept climbing higher on Friday as traders started to think it might even be possible that the BOE could pip the Fed as the ‘first central bank to tighten.’

    Recent commentary from governor Carney, as well as supporting data, have upped expectations hugely for a rate hike in early 2016 – with the consensus revolving around February.

    The chief of the BOE was very clear about what he and his committee wanted to see before hiking rates – viz higher core inflation, higher labour costs and a rise in economic activity.

    Assuming these happen a rate hike is possibly on the cards. On Friday, data from the U.S was mixed, after Housing Starts and Building Permits showed the quickest rise since 2007 – but this was offset by disappointing wage data which slowed, and a doveish ‘back-lash’ from Fed’s Fischer, who said inflation was too low. The U.K conversely has seen accelerating average earnings, although some of the rise can be attributed to a greater increase in bonuses , not basic pay.

    JPY

    The dollar gave back some of yesterdays gains against the yen as traders booked profits. The yen is flat with domestic holidays on the calender.

    Yesterday the BOJ monthly economic survey indicated that Japans economy has continued to recover at a moderate pace. Furthermore the central bank expects the nation’s economy to continue its moderate recovery trend and estimates the consumer price inflation rate to be around zero percent in the near-term, largely due to the fall of energy prices.

    A Nikkei report due for release on July 21 says the BOJ focus is on October. Economists are evenly divided on whether the central bank will ease further then.

    The yen was trading at 124.04  per dollar late in the New York session on Friday.


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