DY: U.S. Dollar Sustains Gains Amid Stronger-than-Expected Housing Data
The Greenback found meaningful follow through on its gains from yesterday as risk-aversion continued to grip the market in the overnight. In fact, the safe haven currencies, the Japanese Yen, the Swiss Franc and the United States Dollar, were all up against their constituents, with the Franc being the strongest of the three funding currencies. While the tone for the North American session was set on the premise that the inflation is being tempered in the Euro-zone and the United Kingdom’s economy continued to cool as evidenced by soft retail sales figures from May.
Surprisingly, in the hour before the North American equity markets opened, reports out of the United States bucked the trend of disappointing data out of the world’s largest economy. Building permits jumped by 612K in May, beating the 557K expectation as predicted by a Bloomberg News survey. Overall, permits expanded by 8.7 percent from the month prior, beating the 1.1 percent expected contraction. Similarly, housing starts increased by 560K in May, up 3.5 percent from April. Still, falling real estate values and the persistence of foreclosures will weigh on future construction opportunities as the housing sector continues to lag the rest of the economy.
Euro-Dollar 1-minute Chart: June 16, 2011
Charts created using Strategy Trader– Prepared by Christopher Vecchio
The Euro-Dollar fell briefly on the news, nearly 25-pips, but has since rallied, and was testing the 1.4150 exchange rate at the time this report was written. Despite the rally in the pair, the Euro remained down against the basket of funding currencies, with the Euro-Swiss pair leading the declines. The European cross hit an all-time low of 1.1946 in the overnight, and could press lower as concerns over Greece persist.
U.S. Housing Starts: June 2008 to Present
Courtesy: Bloomberg
In the wake of the release, the Dow Jones FXCM Dollar Index dropped, falling from a session high of 9714.62 to as low as 9683.11. The index remained positive for the day as the risk-aversion trade continued. At the time this report was written, the index had gained some back slightly, to 9693.45.
