Dollar Finishing Week Softly

The dollar is mixed today, but is set the finish the week on soft footing.   The euro's resilience is notable today in the face of the disappointing news stream.  However, it has not convincingly violated the downtrend line (connecting the early May and early June highs) and comes in near $1.4540-50 today.   

The short-term momentum indicators I use to monitor intraday price action suggests there it is likely to rise above there today, perhaps on the back of a disappointing ISM report. 

Recall that earlier this week, German and France reported simply horrific retail sales and household consumption respectively.  China's PMI was poor  (50.9 vs 52.0 in May).  US data has been generally disappointing, but some minor regional surveys and yesterday's Chicago ISM were stronger than expected.    The key report next week is the US employment figures and there is little reason to expect a robust report.  This stands in contrast to the ECB, which most likely will hike rates next Thursday. 

European PMIs were across the board poor.  It is the third consecutive month the euro zone PMI for manufacturing has fallen.  Ireland, Spain and Italy were below the 50 boom/bust line.   Norway and Sweden also reported greater weakness than expected, as did the UK.  Perversely, the BOE may find some consolation in the fact that the price component fell sharply from 71.4 to 60.9, which is the lowest since Dec 2009. 

News that the Eurogroup meeting on Sunday has been replaced by a video-conference is not a big deal--modern technology vs oil consumption--not bad initiative necessarily especially in light of the push back over the EC's insistence on a budget increase.  However, more important, German banks have balked big time against the Finance Minister's plan.   It appears that only about 20% of German Greek sovereign bond exposure would be rolled by the private sector. 

Although the ECB has insisted this is a private sector burden sharing, the Germany has seen fitting to allow two landesbanks to participate.  If German banks have agreed to about 2 bln euro roll, the landesbnaks seem prepared for about 1.2 bln euro roll. 

Japanese data were mixed.  Household spending unexpected fell (surprising after firm retail sales), though the year-over-year contraction eased to -1.9% from -3.0% in April and -8.5% in March.  Unemployment unexpectedly fell to 4.5% from 4.7%.  The reluctance to spend and the self-restraint slowly seems to be ebbing.  Consumer confidence, jobs and industrial all improved. 

Deflation forces are ending as core CPI remains positive for the second consecutive month.  The headline Tankan survey results were poor, but the expectations for the next were the Sept report are better.  Capex plans were also improving.  In terms of the dollar-yen rate, large Japanese manufacturers lowered their forecast to about 82.60 from 84.20.