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    Dollar rises after Lockhart’s September rate hike ‘grenade’ ignites markets

    USD

    The dollar rose on Tuesday after a voting member of the Federal Open Market Committee known for his centrist views made a dramatic shift to a more aggressively hawkish stance.

    Atlanta Fed President Dennis Lockhart said that it would take a “significant deterioration” in the economic picture for him NOT to vote for a rate hike at the September meeting.

    Previously Lockhart had wanted to see a rise in Consumer Spending as a condition for an increase in rates, however, he made no such stipulation in comments on Tuesday.

    Lockhart said his a priori stance going into the September meeting was to make a change – and he would not be placing too much weight on new data in the next few weeks unless it was especially week.

    Meanwhile on the data front it was a relatively thin day with Factory Orders dominating the calendar and rising by 1.8% as forecast from a previously negative -1.1% in June.

    EUR

    The euro weakened quite severely on Tuesday, although due to a lack of market moving data this had more to do with other currencies strengthening than negative euro-zone drivers.

    The main data to be released were Producer Prices – also known as Factory Gate prices – which showed a slightly deeper-than-expected decline of -0.1% mom in June compared to 0.0% previously, and 0.0% expected. Year-on-year it fell by -2.2% in line with expectations and deeper than the -2.0% result in June 2014.

    A detailed breakdown of the components of PPI showed the main drag on price growth came from a fall in energy prices.

    GBP

    On Tuesday the main data for the pound came in the form of Construction PMI, which fell disappointingly to 57.1 when it had been forecast to rise to 58.5 from 58.1 previously.

    This did not affect sterling that much, however, as it ended the day mixed overall. Many pound investors will be inactive due to either going on holiday or because they are waiting for the results of Thursday’s double-whammy of big releases from the BOE, which includes the policy decision and the quarterly inflation report.

    Other data on Tuesday included Nationwide House Prices, which rose by 3.5% in July from 3.3% previously, in line with expectations. Month-on-month prices also increased by 0.4% from -0.2% previously, also in line with analyst’s estimates.

    JPY

    The yen traded on a weaker footing on Tuesday versus the dollar as traders seemed to move to the dollar as they ran from commodities. The dollar burst the 124 barrier and is currently trading at yen 124.04 per dollar in the second half of the New York session.

    Overnight data indicated that monetary base in Japan advanced 32.8% in July on an annual basis, following a gain of 34.2% in the previous month.

    Earlier today data released showed that Japan´s labour cash earnings fell 2.4% yoy in June against market expectations for an increase on 0.9% and following a revised rise of 0.7% in May.

    Japan´s release of services PMI scheduled for tomorrow Wednesday will grab a lot of attention as will the end of the week BOJ monetary policy decision and of course Governor Kuroda´s statement.

    USD

    The dollar rose on Tuesday after a voting member of the Federal Open Market Committee known for his centrist views made a dramatic shift to a more aggressively hawkish stance.

    Atlanta Fed President Dennis Lockhart said that it would take a “significant deterioration” in the economic picture for him NOT to vote for a rate hike at the September meeting.

    Previously Lockhart had wanted to see a rise in Consumer Spending as a condition for an increase in rates, however, he made no such stipulation in comments on Tuesday.

    Lockhart said his a priori stance going into the September meeting was to make a change – and he would not be placing too much weight on new data in the next few weeks unless it was especially week.

    Meanwhile on the data front it was a relatively thin day with Factory Orders dominating the calendar and rising by 1.8% as forecast from a previously negative -1.1% in June.

    EUR

    The euro weakened quite severely on Tuesday, although due to a lack of market moving data this had more to do with other currencies strengthening than negative euro-zone drivers.

    The main data to be released were Producer Prices – also known as Factory Gate prices – which showed a slightly deeper-than-expected decline of -0.1% mom in June compared to 0.0% previously, and 0.0% expected. Year-on-year it fell by -2.2% in line with expectations and deeper than the -2.0% result in June 2014.

    A detailed breakdown of the components of PPI showed the main drag on price growth came from a fall in energy prices.

    GBP

    On Tuesday the main data for the pound came in the form of Construction PMI, which fell disappointingly to 57.1 when it had been forecast to rise to 58.5 from 58.1 previously.

    This did not affect sterling that much, however, as it ended the day mixed overall. Many pound investors will be inactive due to either going on holiday or because they are waiting for the results of Thursday’s double-whammy of big releases from the BOE, which includes the policy decision and the quarterly inflation report.

    Other data on Tuesday included Nationwide House Prices, which rose by 3.5% in July from 3.3% previously, in line with expectations. Month-on-month prices also increased by 0.4% from -0.2% previously, also in line with analyst’s estimates.

    JPY

    The yen traded on a weaker footing on Tuesday versus the dollar as traders seemed to move to the dollar as they ran from commodities. The dollar burst the 124 barrier and is currently trading at yen 124.04 per dollar in the second half of the New York session.

    Overnight data indicated that monetary base in Japan advanced 32.8% in July on an annual basis, following a gain of 34.2% in the previous month.

    Earlier today data released showed that Japan´s labour cash earnings fell 2.4% yoy in June against market expectations for an increase on 0.9% and following a revised rise of 0.7% in May.

    Japan´s release of services PMI scheduled for tomorrow Wednesday will grab a lot of attention as will the end of the week BOJ monetary policy decision and of course Governor Kuroda´s statement.


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