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    Dollar falls after Fed rate hike expectations hit by Chinese stock rout

    USD

    The dollar weakened on Monday after another big sell-off in Chinese stocks, which saw the Shanghai Composite Index drop 8.48%, and raised fears the Fed might delay its decision to hike interest rates, due to external sources of risk.

    The slow-down in China’s powerhouse economy offset hopes of an early lift-off from the Federal Reserve, reversing the confirmation gained on Friday after the central bank mistakenly published a document which indicated it was preparing form an interest rate hike this year.

    The dollar weakened on Monday despite positive Durable Goods data which showed an unexpected 0.8% increase in Core Durable Goods in June – beating expectations of a 0.5% rise mom. Headline Durable Goods Orders which include big price-tag transport orders also rose, increasing by 3.4% from 1.8% May and exceeding the 3.1% forecast.

    EUR

    The euro strengthened after the release of better-than-expected sentiment data on Monday.

    The IFO Business Climate survey, which measures levels of confidence in Germany businesses, came out at 108.0 in July from 107.5 previously, when a fall to 107.2 had been forecast.

    The Current Assessment component, came out at 113.9 from 113.1 previously, when a fall to 112.9 had been expected.

    Finally ‘Expectations’ rose to 102.4 from 102.1 – also improving on estimates of a drop to 101.8.

    The single currency was boosted by other data which showed a increase in private loans of 0.6% yoy, which was in line with expectations, and higher than the 0.5% previously. The lack of lending in the region has been a major obstacle to recovery, so the rise was a positive sign.

    Money Supply (M3) remained at 5.0%, failing to meet estimates of a 5.1% rise yoy in June.

    ECB’s Coeure said that Greek debt might be restructured but only under condition that it was part of a sustainable long-term programme of recovery which included at its heart, substantial economic reforms.

    GBP

    The pound traded mixed on Monday after data from the Consortium for British Industry (CBI) showed that British Manufacturer’s Order Books in July fell to their lowest level in two years.

    CBI Total Orders fell to -10 from -7 previously, when it had been expected to improve to -5.

    The contraction was thought to be indicative of a general slow-down in the competitiveness of U.K exports as a result of the strengthening pound.

    Katya Hall, Deputy Director General of the CBI, said that “greater buoyancy in U.K exports remains a missing element from the U.K recovery.”

    CBI Selling Prices, rose to 1, however, from -7, beating expectations of a fall to -8.

    Not all the CBI data was gloomy though – with CBI Business Optimism rising above expectations, to 8 from 3 previously when a fall to 1 had been forecast.

    JPY

    The yen rose on Monday, after Chinese stocks continued their downward spiral, stoking global growth concerns.

    Apart from haven flows, Japan’s corporate service index showed a rise of 0.4% yoy in June, compared to an advance of 0.6% in the previous month.

    As a result of verbal warnings against further depreciation of the yen by Japanese officials, Marc Chandler global head of Brown Brothers Harriman believes the dollar looks vulnerable against the yen.

    The Bank of Japan’s Deputy Governor Nakase said today that Japan’s price trend was improving steadily, and that the nation’s inflation was likely to hover around 0.0% until the end of the summer, then pick up pace rather quickly. He also said that he expected CPI to reach 2.0% around the first half of fiscal 2016, and that there would be no change to the central bank’s stance on adjusting policy if needed.

    USD

    The dollar weakened on Monday after another big sell-off in Chinese stocks, which saw the Shanghai Composite Index drop 8.48%, and raised fears the Fed might delay its decision to hike interest rates, due to external sources of risk.

    The slow-down in China’s powerhouse economy offset hopes of an early lift-off from the Federal Reserve, reversing the confirmation gained on Friday after the central bank mistakenly published a document which indicated it was preparing form an interest rate hike this year.

    The dollar weakened on Monday despite positive Durable Goods data which showed an unexpected 0.8% increase in Core Durable Goods in June – beating expectations of a 0.5% rise mom. Headline Durable Goods Orders which include big price-tag transport orders also rose, increasing by 3.4% from 1.8% May and exceeding the 3.1% forecast.

    EUR

    The euro strengthened after the release of better-than-expected sentiment data on Monday.

    The IFO Business Climate survey, which measures levels of confidence in Germany businesses, came out at 108.0 in July from 107.5 previously, when a fall to 107.2 had been forecast.

    The Current Assessment component, came out at 113.9 from 113.1 previously, when a fall to 112.9 had been expected.

    Finally ‘Expectations’ rose to 102.4 from 102.1 – also improving on estimates of a drop to 101.8.

    The single currency was boosted by other data which showed a increase in private loans of 0.6% yoy, which was in line with expectations, and higher than the 0.5% previously. The lack of lending in the region has been a major obstacle to recovery, so the rise was a positive sign.

    Money Supply (M3) remained at 5.0%, failing to meet estimates of a 5.1% rise yoy in June.

    ECB’s Coeure said that Greek debt might be restructured but only under condition that it was part of a sustainable long-term programme of recovery which included at its heart, substantial economic reforms.

    GBP

    The pound traded mixed on Monday after data from the Consortium for British Industry (CBI) showed that British Manufacturer’s Order Books in July fell to their lowest level in two years.

    CBI Total Orders fell to -10 from -7 previously, when it had been expected to improve to -5.

    The contraction was thought to be indicative of a general slow-down in the competitiveness of U.K exports as a result of the strengthening pound.

    Katya Hall, Deputy Director General of the CBI, said that “greater buoyancy in U.K exports remains a missing element from the U.K recovery.”

    CBI Selling Prices, rose to 1, however, from -7, beating expectations of a fall to -8.

    Not all the CBI data was gloomy though – with CBI Business Optimism rising above expectations, to 8 from 3 previously when a fall to 1 had been forecast.

    JPY

    The yen rose on Monday, after Chinese stocks continued their downward spiral, stoking global growth concerns.

    Apart from haven flows, Japan’s corporate service index showed a rise of 0.4% yoy in June, compared to an advance of 0.6% in the previous month.

    As a result of verbal warnings against further depreciation of the yen by Japanese officials, Marc Chandler global head of Brown Brothers Harriman believes the dollar looks vulnerable against the yen.

    The Bank of Japan’s Deputy Governor Nakase said today that Japan’s price trend was improving steadily, and that the nation’s inflation was likely to hover around 0.0% until the end of the summer, then pick up pace rather quickly. He also said that he expected CPI to reach 2.0% around the first half of fiscal 2016, and that there would be no change to the central bank’s stance on adjusting policy if needed.


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