High Beta FX Falters as US Equities Sink

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Market Drivers for July 26, 2013
USD/JPY hits a two week low as 98.00 given on weak equities
Japanese CPI rises at fastest pace in 4 years
U of M better at 85.1 versus 84.0
Nikkei -2.97% Europe 0.40%
Oil $104.70/bbl
Gold $1330/oz.

Europe and Asia:
JPY National CPI 0.4% vs. 0.3%

North America:
USD U. of Michigan Confidence 85.1 vs. 84.0

High beta currencies came off the day’s high in mid morning North American trade today as US equities sold off into the weekend on what was otherwise a very uneventful, lazy Friday summer trading day. Both the euro and cable eased away from 1.3300 and 1.5400 respectively as risk aversion flows pushed the currencies lower, while Aussie failed at the 9300 level once again trading to a low of 9227 in morning US dealing.

The dollar however was significantly lower against the yen, with USD/JPY setting fresh two week lows as the pair tumbled through the 98.00 figure before finally finding a modicum of support. The greenback continues to suffer from the adjustment in perception as the market is becoming more and more convinced that the Fed will hold off on any tapering of QE for the foreseeable future.

On the economic front the calendar was nearly barren with only the final revision of the U of M data on the docket. The report showed a slight improvement from the original read to 85.versus 84.0 initially reported. The present conditions index however slipped slightly to 98.6 from 100.00 anticipated.

Next week the eco data schedule picks up markedly with a slew of economic and monetary reports due. In addition to the Fed meeting, the market will also see July’s NFP data as well ISM reports. The deluge of data should provide a much clearer picture of the business conditions on the ground and could either reinforce the view that QE will remain in place for the time being or change that perception quickly giving greenback another boost.a

Boris Schlossberg
Managing Director

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