Dollar Stabilizes At Elevated Levels After Surging Yesterday

Europe

German industrial production fell for the second consecutive month and the fourth time in the first five moves of the year. The Bloomberg survey found a median forecast of a 0.5% gain, and instead, the world's fourth-largest economy reported a 0.3% decline, the same as in April, which had initially been reported as a 1% decline. This was the same pattern seen in yesterday's factory orders--the May report showed an unexpected decline while the April figures were revised to show a 1.2% gain rather than a 0.2% loss.  

Norway, where the central bank has signaled a rate hike will likely be delivered in September, reported a sharp acceleration of its economy in May. The month's mainland GDP surged by 1.8%, twice what economists had projected after a revised 0.4% expansion in April (initially reported as 0.3%). The surge in activity took place even though industrial production and manufacturing output slipped. At the end of the week, Norway reports its June CPI figures. While the headline may drift toward 3.0%, the underlying measure, which adjusts for tax changes and excludes energy, is expected to be steady at 1.5%. For its part, Sweden reported a strong recovery in May's industrial production and household consumption. The monthly GDP rose 0.4% in May after contracting by a revised 1.1% in April (initially a 1.4% contraction).  

The euro recorded a marginal new low yesterday since early April, a little above $1.18.It has not been able to distance itself from this support area. It has been up to almost $1.1835 today but lacked much enthusiasm. That said, yesterday's bearish reversal after $1.19 held has not seen follow-through selling today. The does not seem to be much near-term conviction. The bears cannot be happy that that $1.18 level is proving formidable, while the inability to overcome the $1.19 cap may give bulls a second thought. Sterling fared better in yesterday's dollar surge. It held well above last week's lows (~$1.3735), and there also has been no follow-through selling after yesterday's outside down day. Here too, narrow ranges prevail (sterling has been capped near $1.3815) as participants await clearer directional cues. A move above $1.3850 would lift the tone.  

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Read more by Marc on his site Marc to Market.

Disclaimer: Opinions expressed are solely of the author’s, based on current ...

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