The U.S. dollar continued to trend lower against the majority of its counterparts as global stocks advanced on speculation the world will avoid a return to recession, reducing demand for a haven. Indeed, European and Asian equities are over 1.0% today and U.S. stock futures foreshadow a higher open for American shares. The dollar fell on Friday after Federal Reserve Ben S. Bernanke said in Jackson Hole, Wyoming that the U.S. economy isn’t weak enough to warrant immediate additional fiscal stimulus. While Bernanke said the Fed still has tools to aid the recovery if needed, he stopped short of indicating that the central bank will move ahead with a third round of government bond-buying. The Swiss frank fell against all its rivals on speculation Swiss policy makers will introduce new measures to cap the currency’s gains and local banks may start charging customers for franc deposits. Meanwhile, the U.S. economic docket showed that consumer spending climbed more than forecast in July. Purchases rose 0.8%, the biggest gain since February, after a 0.1% decline the prior month, Commerce Department figures showed today. Consumer spending accounts for about 70.0% of the U.S. economy. Tomorrow sees the release of the S&P Case-Shiller Home price index, consumer confidence and the Federal Reserve meeting minutes, followed by ADP Employment data, Chicago PMI and Factory orders on Wednesday. Weekly jobless claims and ISM manufacturing data is expected Thursday morning, while Non-farm payrolls and the unemployment rate will round out the week on Friday.
The Euro traded to recent highs versus the U.S. dollar as “risk on” trading continues to push stocks higher and boost demand for the higher-yielding currency. However, the euro pared gains after inflation data in several German states slowed in August as seasonal food and energy prices fell. The inflation rate decreased to 2.2% from 2.3% in Bavaria and to 2.3% from 2.7% in North Rhine-Westphalia. The rates in Hesse, Saxony and Bradenburg also eased. With a light economic docket, expect the EUR/USD currency pair to continue to ebb and flow with the prevailing risk appetite.
The Japanese yen weakened against the Euro and British pound while holding flat against the U.S. dollar as soaring global stocks weighed on the safe-haven currency. The yen was also under pressure as Japanese Finance Minister Yoshihiko Noda, who has overseen three currency-market interventions in the past year, was chosen to succeed Prime Minister Naoto Kan. Noda was elected head of the ruling Democratic Party of Japan, paving the way for the 54-year old finance minister to become the third premier since the party took power two years ago. The DPJ is set to use its majority in the lower house to appoint him as prime minister as soon as tomorrow.
The British pound held a tight range against the U.S. dollar as all markets in the U.K. are closed for a holiday. The U.K. economic docket remains light this week with the only data points of note starting on Tuesday with the August GfK consumer confidence survey followed by nationwide house prices on Thursday. Consumer confidence is expected to deteriorate to its lowest read since February of 2009 with estimates calling for a print of -33, down from a previous read of -30. House price data is expected to be mixed with the year on year prices seen growing 0.4% from a previous decline of 0.4%.
