The dollar briefly strengthened
versus the euro after the U.S. Labor Department reported that producer prices
climbed 1.2% in July after increasing 1.8% the previous month before fell on
continued worries about the financial markets and reports showing a big drop in
homebuilding, big rise in wholesale inflation.
Both housing starts and building
permits - a measure of builder confidence - fell to levels in July not seen
since the 1991 recession as the housing market fallout continued.
The Producer Price Index (PPI), a measure of inflation at the wholesale level,
rose 1.2% in July, double what economists were expecting. So-called
"core" PPI, which strips out volatile food and energy prices, rose by
0.7%, more than three times what economists expected.
The yen increased to a three-month high against the euro on speculation
financial firms will report more losses, reducing demand for higher-yielding
assets funded by loans in Japan.
EUR/USD printed lows at $1.4630. The rate had
recovered to trade around $1.4670 into the ZEW survey. Russian
demand was then noted into early US dealing as euro-dollar extended
the day's highs to $1.4708 and then – to $1.4795.
GBP/USD recovered to $1.8595, only breaking back above
$1.8600 in late morning trade to $1.8638. Back down to $1.8570 was temporary
and rate then recovered to $1.8685.
USD/JPY was able to push to highs for the day at
Y110.32, though the rally was brief as the pair eased back under Y110.00.
In Europe
attention will be on BoE’s MPC minutes (at 08:30 GMT). Last week BOE cut its growth
estimate and said that inflation would back under its target level of 2% next
two years. As a result, market players shed their BOE rate hike expectations.
At 10:00 GMT UK CBI orders will be released. Analysts predict orders fell
12% in August after -8% month earlier.