The USD fell against most major currencies overnight despite the release of strong housing data in the US. Housing starts increased 6.9% in June to a seasonally adjusted annual rate of 760,000 units, an almost four year high and beating expectations for an increase of 5.2% to 745,000 units. Housing starts for May were revised up to 711,000 units from a previously reported 708,000 units. However, building permits issued in June dropped 3.7% to a seasonally adjusted 755,000, worse than expectations for a decline of 2.4% to 765,000.
The housing market is a key component to an economic recovery. Positive data from the housing starts would normally see the greenback rise, especially when coupled with better than expected quarterly profits for many US companies over the last few days, including IBM, Yahoo! and Intel. However, investors already with the smell of quantitative easing in mind avoided the greenback to wait and see the weekly jobless claims which are due out later today.
The positive data from the US sent Asian equities rising, fueling demand for the yen. The USD/JPY was down 0.28%, trading at 78.58 with the pair likely to find support at 78.52, the earlier low, and resistance at 78.80, the earlier high. Asian stocks advanced towards the largest gains seen this month with Hong Kong’s Hang Seng Index gaining 1.80%, Australia’s S&P/ASX200 up 1.34%, whilst Japan’s Nikkei 225 Index gained 0.92%
The British Pound received a boost yesterday and was 0.02% against the USD as UK unemployment fell by 65,000 to total 2.58 million. Unemployment among 16 to 24-year-olds fell by 10,000 to 1.02 million, but the long term unemployed (more than two years) increased by 18,000 to 441,000, the highest since 1997. The total unemployment rate fell to 8.1%, down from 8.3% in the previous quarter.
The weakened USD meant there were increases in the commodity markets with Gold, the traditional hedge to the greenback and an asset that would often trade inversely from one another, up 0.42%, trading at $1577.45. Gold futures were likely to test support at $1,567.35 a troy ounce, yesterdays low and test resistance at $1,583.65, yesterday’s high.