Greenback remains in focus

It was a tale of two halves in US trade as the USD initially rallied on the back of a report showing unemployment claims dropped to the lowest level in six years.

The weekly unemployment claims reading dropped to 320,000 which is significantly lower than an expected 334,000. This saw taper talk ramp up, along with an in-line CPI print. However, the USD soon reversed its gains as the Empire State manufacturing index, the Philly Fed manufacturing index and industrial production all missed estimates. The Fed’s September meeting on the 19September is shaping up to be one of the key events of the year.

USD/JPY was the most interesting pair and will set the pace for Asian trade today. USD/JPY dropped from around 98.65 early in US trade all the way down to 97, and this will affect the Nikkei today. Japan was hit by comments made by Finance Minister Aso yesterday. Japan’s Finance Minister Taro Aso was on the wires saying Japan’s second quarter GDP data aids the case for a sales tax hike, and also quashed talk of a lowering of the corporate tax rate to counter the sales tax hike.

In the risk space there were some sharp reversals as risk currencies regained ground against the greenback. AUD/USD bounced off 0.906 to a high of 0.915 and EUR/USD rallied from around 1.322 to 1.336.

Later today we have the eurozone’s current account, CPI and trade balance data due out. Given the recent signs of improvement in data for the region, expectations will be riding relatively high. Over in the US we have building permits, housing starts, productivity, labour costs, consumer sentiment and inflation expectations due out. No doubt all these readings will continue to see investors reprice tapering expectations.

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