It’s not just construction in America that is making news, as back in May, the Eurozone construction sector suffered a similar drop. Output fell 1.7% following a revised 4.3% gain in April. This downturn occurs against a backdrop of increasing trade deficits and international currency speculation. So far this year, the Eurozone has had an average monthly trade surplus of more than 18.55 billion euros. This figure really portrays the region’s painful economic transition.
The euro faced selling pressure again yesterday, breaking a six day rally that had briefly supported the currency. Today, the euro’s value is an unknown figure. At the same time, the dollar is trading somewhat weaker vs. most G10 EM currencies. These forces, combined with recent changes in overall market sentiment, have helped push the dollar’s fix to its lowest level in almost eight months. It’s currently at CNY7.1461 to the renminbi.
A rare and positive combination of US economic data has further lengthened the Dollar Index’s winning streak. A day after the recovery appeared to keel over, Federal Reserve Governor Christopher Waller floated the prospect of an early rate cut. This statement was enough to prompt a recalibration of market expectations. That pessimist sentiment is evident in the swaps market. That implies a year-end fed funds rate of 2.55%, almost 15 basis points below the effective rate of 2.75% set earlier this month.
After registering its annual low around CNH7.15 on July 1, the episode underscores the volatility that dollar’s been under in recent weeks. Regardless, the greenback has built a solid base this week around CAD1.3670. In stark contrast, yesterday AUDCAD reached a new monthly high of near CAD1.3775. The dollar is extremely strong against the Japanese yen, underscoring the dollar’s currency market strength.
The dollar hasn’t gotten outside Tuesday’s range on the peso. It has not traded through CNH7.20 since June 11. This standstill reflects the market’s nervousness in the face of conflicting economic messages from Europe and America on either side of the Atlantic.
In Japan, CPI for June came in as expected. This uniformity was a result of the CPI data being released earlier for Tokyo. This consistent outcome points to a trend toward stable inflationary pressure in Japan, which will factor into future monetary policy decisions.
The yield on 10-year US Treasury bonds is a touch weaker now at just over 4.44%. It has risen by roughly three basis points on the week. This increase could be a sign of what investors are expecting from interest rates in the future as well as economic conditions.