The U.S. dollar held a relatively tight range versus the majority of its rivals as Asian and European equities struggled to find a definitive direction. However, the greenback has weakened in early trading as U.S. equity futures have rallied. The U.S. dollar gained versus the Australian dollar after data showed Chinese manufacturing slowed. Indeed, China’s preliminary purchasing managers’ index dropped to 48.9 in July from a final reading of 50.1 in June. China is Australia’s largest trading partner. The Swiss franc fell against the U.S. dollar and the Euro after Zurich newspaper Blick quoted Switzerland’s Economy Minister Johann Schneider-Ammann saying the currency’s recent strength is “alarming.” “We are prepared” for any measures to be taken, the economy minister continued, sparking speculation that the Swiss National Bank may intervene in currency markets. The economic docket showed that more Americans than forecast filed claims for unemployment benefits last week. Applications for jobless claims benefits increased 10K to 418K according to the Labor Department. Later this morning, leading indicators is expected to register at 0.2%, down from 0.8% in the month prior.
The Euro dropped modestly against the U.S. dollar after European officials signaled Greece may default on government bonds as part of a second bailout for the nation. Luxembourg Prime Minister Jean-Claude Juncker said today he couldn’t rule out a so-called selective default on Greek debt. However, the Euro pared its drop in early trading on speculation governments may guarantee Greek bonds to make it easier for the ECB to accept a default on debt. Euro-area leaders and officials convened today for the second time in a month as they aim to break a deadlock over a new Greek rescue. German Chancellor Angela Merkel and French President Nicolas Sarkozy reached an agreement on Greece after seven hours of talks in Berlin, and details are expected to be released at the summit in Brussels.
The Japanese yen continued to hold near its recent ranges against the greenback and the pair appears unable to break out in a definitive direction. If the Japanese currency finds additional strength in the coming weeks, expect the Bank of Japan and other policy makers to attempt to “talk down” the Japanese yen and possibly hint at future intervention.
The British pound pushed modestly higher versus the U.S. dollar in early trading as traders added higher-yielding assets to their portfolio. However, the sterling fell against the Euro as a report showed U.K. consumer confidence fell in June. An index of sentiment declined 4 points to 51 in May, when it rose because of a boost from an extra public holiday for the for the royal wedding and warm weather, Nationwide Building Society said today.
