The dollar tumbled across the board in the Thursday session on the heels of a rally in oil, which jumped to its highest level in 2 ½-weeks to $121.94 per barrel. The spike higher in crude prices was prompted by a combination of heightened geopolitical uncertainty stemming from Russia's decision to halt cooperation with NATO and warnings that Saudi Arabia may scale back its recent increase in production amid declining prices. The move higher in oil sent the greenback lower, falling near the 1.49-level against the euro and 108.10 versus the yen.
The US economic reports released today saw improvements in both weekly jobless claims and the Philadelphia Fed manufacturing survey. Weekly jobless claims improved to 432k, down from 450k a week earlier. Meanwhile, the Philadelphia Fed manufacturing survey was better than expected at -12.7 in August, versus calls for an improvement to -14.0 from -16.3 in the previous month. The July leading indicators deteriorated to -0.7%, compared with -0.1% from June.
Traders will look ahead to tomorrow's speech by Fed Chairman Ben Bernanke slated for 10:00 AM. His speech will be closely scrutinized for hints on future policy moves and any indications of support for troubled Fannie Mae and Freddie Mac.
GBP Bounces on USD Weakness
Cable rallied to 1.8780 amid weakness in the greenback. The sterling rally will likely be short-lived particularly heading into the Friday session with the 2nd release of UK GDP due out. The data are seen revealing further downward revisions to the growth rate of the UK economy in Q2, down to 0.1% from 0.2% in the previous quarter and at 1.5% versus 1.6% in the year prior. The sluggish figures will likely reinforce sentiment that the UK economy is headed toward a recession and that the Bank of England's next move may be a rate cut. The recently released minutes from the BoE's last meeting offered a dovish stance, acknowledging that inflation momentum may have eased given lower oil and commodity prices. We expect the sterling to continue to extend losses, with our interim target at 1.84.
The US economic reports released today saw improvements in both weekly jobless claims and the Philadelphia Fed manufacturing survey. Weekly jobless claims improved to 432k, down from 450k a week earlier. Meanwhile, the Philadelphia Fed manufacturing survey was better than expected at -12.7 in August, versus calls for an improvement to -14.0 from -16.3 in the previous month. The July leading indicators deteriorated to -0.7%, compared with -0.1% from June.
Traders will look ahead to tomorrow's speech by Fed Chairman Ben Bernanke slated for 10:00 AM. His speech will be closely scrutinized for hints on future policy moves and any indications of support for troubled Fannie Mae and Freddie Mac.
GBP Bounces on USD Weakness
Cable rallied to 1.8780 amid weakness in the greenback. The sterling rally will likely be short-lived particularly heading into the Friday session with the 2nd release of UK GDP due out. The data are seen revealing further downward revisions to the growth rate of the UK economy in Q2, down to 0.1% from 0.2% in the previous quarter and at 1.5% versus 1.6% in the year prior. The sluggish figures will likely reinforce sentiment that the UK economy is headed toward a recession and that the Bank of England's next move may be a rate cut. The recently released minutes from the BoE's last meeting offered a dovish stance, acknowledging that inflation momentum may have eased given lower oil and commodity prices. We expect the sterling to continue to extend losses, with our interim target at 1.84.
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