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Dollar Dips Further On The Day

Swiss fundamentals and momentum from the recent retail sales report did little in contributing to todays dollar weakness.  Gaining against the dollar, the Swiss franc strengthened in the North American session, to top the three most moving pairs on the day, declining by 1.1 percent.  Attributed to the dip were less than exemplary personal income and spending figures as well as a lighter inflationary perspective.  According to this mornings government releases, personal spending rose 0.4 percent, as did income.  However, both figures were slightly lower than the previous reports which had both rising at 0.6 and 0.7 percent respectively.  It coincides with earlier concerns that consumers may be more reluctant to consume on a broader basis given the higher cost of borrowing.  Additionally, traders saw further confirmation that the August decision remains in jeopardy as the core PCE came in lower than expected.  The preferred gauge of inflation by Fed policy makers, the report climbed in line with the previous figure, keeping the hawkish proponents on the wayside.  Lending the final blow of the morning debacle was the lower Chicago Purchasing Managers report.  Previously rising to a 61.5 reading, the figure declined for the May to June period, making the case for another 25 basis point rate hike questionable at best.  Heading into the weekend, the weeks open looks to be tepid as markets prepare for the <?xml:namespace prefix = st1 ns = "urn:schemas-microsoft-com:office:smarttags" />US July fourth holiday.  

GBPUSD

Positive Growth For The UK

Coupled with US data on the session, the British pound received a boost from higher than expected gross domestic product figures.  Already counting on inflationary pressure to boost rates higher, bulls still remained concerned over the growth prospects of the economy in affecting the Bank of Englands decision next week.  However, the market was pleasantly surprised as overall GDP ticked slightly higher.  With momentum from yesterday remaining in the market, the Pound ranks as the second highest mover on the board, only second to the EURCAD cross.  The intermediate jump should set up next weeks data very nicely as most focus looks to be placed on the Bank of Englands decision.  Although expected to leave rates at the current 4.50 percent benchmark, there remains a remote possibility that rates could jump higher, although unlikely.  With inflationary pressures still looming, a housing sector that is purporting rates of consumption and a rebound in overall productivity, central bankers may indeed have to reconsider the economic outlook.  Coupled with the addition of three new members to the board, sentiment may be shifting to a more hawkish bias.  That alone looks to be pumping up Sterling optimists going into next week.  In addition, PMI manufacturing is expected with services data as well.  Heading into the weekend, some selling pressure can be expected on profit taking at the 1.8500 figure with further short interest above till the 1.8570 level.  Competitive bids remain at 1.8430 and slightly below at 1.8365.

EURCAD

Euro Bounces Ahead Of Canadian Holiday

Cross offers took the USDCAD slightly higher after the Bank of Canada released a mixed signal following the business outlook report.  According to the report, inflationary pressures are expected to climb, heading into the year end.  However, labor shortages seemed a story of the past as companies reported more slack in employment lines.  Nonetheless, with inflationary pressures likely to push the European Central Bank higher in coming months, players and traders took the Euro zone side.  Additionally aiding the top gainer on the board today, was the fact that the market will essentially be closed for two straight days, with a Canadian holiday on Monday and the US Fourth of July on Tuesday.  Comparatively, the euro leg was boosted in similar fashion to the majors during the two day stint, mainly dovish Fed statements and softer US data.  Next weeks decision could strengthen the currency should policy makers remain hawkish and German orders be plentiful.  Till then, trading activity looks to be thin in summer and holiday volume.