USD traded sharply lower Friday pressured by higher equity markets, firmer crude prices and report that EU manufacturing and services PMI rose to their highest level in 15 months. USD extended its losses after the release of much better than expected rise in US July existing home sales. US existing home sales for July rose 7.2%, well above market expectations of a 2% rise. The report fueled further gains for US equities and speculation that the recession in the US has ended. A consensus is emerging that the US and global recession is ending supporting equity markets and improving risk sentiment. The rise in EU manufacturing and services PMI is further confirmation that the recession in Europe is ending. It's interesting to note in today's early trade that the USD decline was broad based with the JPY rising along with the other major currencies. The JPY was supported by safe haven flows inspired by weaker Nikkei trade and continued uncertainty about the outlook in China. Report that the Chinese government will audit China's bank loans sparked volatile trade in the Asian equity markets and the Nikkei closed 145 points lower. JPY erased overseas gains and traded lower pressured by a sharp rise in risk appetite and a spike in bond yields after the release of US existing home sales. There was little reaction to a Wall Street Journal report that warned that the US banks entering into a new phase of the financial crisis as more US banks are failing. Regulators may seize Guaranty Financial. The closing of Guaranty Financial would mark the 10th largest bankruptcy in US history. In addition, the MBA says that the percentage of mortgages in foreclosure or at least one payment past due has hit a record 13.16% in Q2. This could present more trouble for US banks.
Today's US data:
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