Another Soft Data Point, Another Risk Rally

A weak Philly Fed sparked a US dollar sell off on expectations the Fed will come to the rescue. The Australian dollar was the best performer while the euro lagged. The final day of Asia-Pacific trading for the week is light but typically features a drift higher in risk assets. Yesterdays longs in Aussie, cable, USDCAD and US crude oil were not filled even though their stated targets were all hit shortly after publication. See more below on those in progress and status of the unfilled trades.

The Philly Fed manufacturing index was at -12.9 in July compared to -8.0 expected. It was better than the -16.6 reading in June but the employment component fell to the lowest since Oct 2009 and hours worked declined as well.

Manufacturing has been a source of strength in the US recovery but lack of overseas demand is causing production slowdowns.

Initial jobless claims also rose to 386K compared to 365K. A high reading was expected due to the difficulty of seasonal adjustments as auto plants temporarily close to re-tool.

EURUSD slumped to 1.2229 early in US trading but reversed after the Philly Fed on expectations the FOMC will introduce QE3 later this year. EUR/USD slowly marched to 1.2276.

The risk on appetite fuelled larger gains in cable and AUD/USD, which hit 1.5730 and 1.0430, respectively.

The calendar is light with a speech from the RBAs Kent in Sydney at 2315 GMT. Later, at 0135 GMT, MNI releases its Chinese Current Business Conditions index for July. The June reading was 53.21, the lowest since December.

3 of the 4 EURUSD shorts are in progress, while USDCAD, cable & oil were not filled. Gold remains unfilled. Click here for direct access: http://ashraflaidi.com/products/sub01/access/?a=667 Non Subscribers click here: http://ashraflaidi.com/products/sub01/

-AB