Intraday Market Thoughts

No Dollar Direction From Bernanke

by Adam Button
Jul 18, 2013 0:00

The market was looking for clarity from Bernanke but the Chairman said he's waiting for clarity from the data. On the day, the pound led while the yen lagged. Chinese property prices and Japanese department store sales are the highlights in Asia.

Bernanke's testimony continued to stress the message of tapering conditional on economic improvement. The dollar tried moves lower and higher on his comments but was virtually unchanged.
Until last week, the market was growing comfortable with a September taper but Bernanke's comments were slightly more dovish, suggesting it's not decided.
Economic data points like Wednesday's housing starts numbers don't help the case for tapering. Starts were at the lowest since August 2012 at 836K compared to 959K expected. Later in the day, it was a different story as the Beige Book contained upbeat comments on manufacturing, housing and consumer spending.

The takeaway continues to be that economic data is extremely important in the coming weeks and months. Look for larger-than-normal dollar moves on every releases.

In Canada, the BOC downgraded foreign growth forecasts and changed its tone on removing stimulus in Poloz's first decision as leader. His comments left considerable uncertainty, however, as he talked about potential upside risks in housing and strong private sector demand from the US – both would lead to sooner rate hikes.

In the upcoming session, a series of data points from Australia and New Zealand will keep traders on their toes but the only consequential releases are later from China and Japan. First, at 0130 GMT, China releases data on June property prices. With government tightening measures in place, there is a risk of a surprise drop.

Later, the focus turns to Japan with department store sales at 0530 GMT. Abenomics has been a modest success so far and the Nikkei has quietly risen 17% from the June lows.

Ashraf's Premium Insights opened new trades in EURUSD, USDJPY, GBPUSD, EURJPY and GBPJPY, while our USDCAD longs survived the 1.0320 stop after the BoC trimmed its 2014 outlook, removed the reference to "the modest withdrawal" of stimulus and spelled out slowing GDP in China as the reason for downgrading its global growth forecast. All of the latest Premium trades and charts are in the latest Premium Insights.
Act Exp Prev GMT
House Price Index (JUN)
6% Jul 18 1:30
Housing Starts
0.836M 0.959M 0.928M Jul 17 12:30
Housing Starts (m/m)
-9.9% 3.9% 8.9% Jul 17 12:30
Fed's Beige Book (JUL)
Jul 17 18:00

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