Today's release of US trade balance of June has helped the greenback to keep its pressure across the broad. The US trade balance of June came at -56.8 and it was expected to be -61.00$ billion and we wait later this week for the release of US retail sales of July which is expected to increase broadly by .2% m/m and excluding auto sales by .5% m/m. also we have July US CPI which is expected to reach 5.1% y/y and its core which excluding food and energy to increase by 2.4% y/y which is the same rate of June
The single currency is still suffering selling pressure after last week dovish comments of Jean Cluade Trichet after the ECB decision to keep the interest rate unchanged at 4.25%. Trichet has highlighted the growth down side risks by a serious talking about the growth down side risks. In the same time he has tried to mention that the ECB recent decision to hike interest rate by .25% was important to avoid inflation second round effect and the ECB main job is to anchor inflation and to settle price stability over the medium term in the Euro zone. The single currency has tumbled across the broad aggressively. It has reached today 1.4815 versus the greenback but it looks that the single currency has not found a real footing yet and it is still suffering a technical pressure versus the greenback after forming another lower high lower than 1.55 came after a series of lower highs at 1.575 after 1.5935 and 1.6023. The next support is at 1.482 then 1.444. it is important to watch this week release of the ECB monthly report and July HICP which is expected to be 4.1%.
The cable was under the same pressure diving lower than 1.90. This pressure came recently from the weak manufacturing CIBS of July which has reached 44.3 well below 50 in the contracting territory. This weak number has come after the recent UK mortgage approvals of June which have came at just 36k and the -36 of the UK retail sales CBI of July which could give enough pressure on the cable to sink below 1.991 as it has reduced the expectation of a new MPC split decision or even if there is a vote for hiking in the face of inflation again, it is hard to have a majority to hike interest rate amid the current decline of the commodities and oil prices which trading for the third week below 130$ a barrel reaching the low of three months below 120$ a barrel today as the serious needs of interest rate cut to spur investments and consuming currently which highlighted again yesterday by the release of the weaker-than-expected UK construction PMI which reached 36.7 in July which is the weakest since the indicator beginning in 1997. These dovish data came along with Halifax reporting of a yearly fall in house prices for more than 10 percent in its monthly report this week.
The greenback could have strength from the oil and commodities prices decline versus the gold as it is the mirror of inflation amid a wave of getting back trust in the US equity market which did not exist a month ago ahead of the US financial quarterly earning reports.
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FX Consultant
Walid Salah El Din
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