Tuesday, August 19, 2014

Main Points for the day

•     Dollar gains broadly as NAHB index beats expectations
–    Up vs all G10 currencies except AUD
–    Mixed vs EM currencies as carry trades continue to attract attention
•     AUD higher after RBA minutes are released
–    I mistrust the rally as minutes emphasized the risks to the forecast
–    AUD could fall back tomorrow on RBA Gov. Stevens’ testimony
•     NZD weaker as PPI falls
•     Eastern European currencies gaining vs EUR, not USD
–    HUF, PLN, CZK higher vs EUR but not USD as USD strength masks their resilience
–    RUB did gain vs USD – was best-performing EM currency over last 24 hours
–    Investors interested in carry trades might want to look at PLN, HUF vs EUR, JPY
•     Today:
–    Eurozone: Eurozone current account for June not likely to be market-affecting
–    UK:  CPI for July expected to slow a bit; could weaken GBP

–    US: CPI for July expected to slow, but with Fed looking more at employment than inflation, not likely to move market. Housing starts & building permits for July expected to rise, adding to NAHB’s evidence of improving housing market = USD-positive

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