Date: Friday 02 Jul 2010
A flurry of downbeat reports on the American economy had the dollar in retreat against the major currencies Thursday, sending the pound to an eight-month high.The euro was already doing OK against the greenback after Spain managed to sell €3.5bn of five-year bonds in an oversubscribed auction.
It also appears the US currency is losing its status as a safe haven, with the so-called risk trade being replaced to some degree by fundamentals.
US initial jobless claims rose to 472,000 last week, according to the Labor Department. Economists had wanted a drop to 452,000. That figure wasn’t welcome ahead of Friday’s non-farm payroll number.
The Institute for Supply Management’s manufacturing index fell from 59.7 in May to 56.2 last month, the lowest number since October.
Meanwhile, the removal of the homebuyer tax credit led to a 30% slump in sales of existing homes in the US. The National Association of Realtors says its Pending Home Sales Index fell from 110.9 in April to 77.6 in May. A fall was expected but not one that sharp.
Sterling topped $1.5150 on a report that Britain’s manufacturing sector continued to grow in June and held near the previous month’s 15-year high.
The CIPS manufacturing PMI headline index slipped to 57.5 last month from 58 in May, in line with expectations. A read of over 50 indicates expansion.
“The rate at which the sector has been recouping the output lost during the recession has been nothing short of remarkable, with around one-third having been recovered by the end of June,” said Rob Dobson, economist at Markit, which compiles the report with the Chartered Institute for Purchasing and Supply.
But the UK currency eased versus the euro on the Spanish auction news. A third member of the Bank of England’s Monetary Policy Committee David Miles also said there was no need for an immediate interest rate hike.It was also announced that 78 European banks have borrowed €111.2bn in short-term funds from the European Central Bank.
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