American focus: the dollar rose

The US dollar rose against the euro after the publication of strong housing data that raised expectations of market participants regarding economic growth.

Nevertheless, the dollar continues to trade in a narrow range against other major currencies, as investors have largely refrained from taking action in anticipation of US data for July and the publication of minutes of the meeting of the Federal Reserve System. It is expected that these events will give investors guidance on the timing of raising short-term interest rates the Fed.

Investors continue to hope that the strong US data will force the Fed to raise interest rates to a level close to zero. Such a step the central bank will reflect positively on the dollar. Rising interest rates in the US will support assets denominated in US dollars, which will make the US currency more attractive for investors.

Housing starts continued to rise in July, helped by a surge in single-family homes sector bookmarks. This was reported in the statement of the Ministry of Commerce.

According to data seasonally adjusted bookmarks of new homes rose in July by 0.2% in the previous month, reaching an annual rate of 1 206 thousand. Units. The last value is the highest since October 2007. Adding that this was the third time in four months, when the index reached a new record high since the recession began.

The Ministry of Commerce also said that construction of single-family housing, which make up almost two-thirds of the market, jumped by 12.8%, reaching the highest level since December 2007. Meanwhile, bookmarks multifamily housing, including apartments and condominiums fell by 17% in June. With regard to construction permits, their number decreased by 16.3% to 1,119 thousand. Units. Economists had expected housing tab was 1190 thousand. Units against 1,204 thousand. In June (revised 1174 thousand.), While the number of building permits is at the level of 1232 thousand. Compared to 1337 thousand. In June (revised 1343 thousand. ).

It is worth emphasizing, housing starts is still low by historical standards, although there are signs of increasing demand. The data showed that compared to July of last year Bookmarks homes rose by 10.1%, while the number of permits increased by 7.5%.

The pound rose substantially against the US dollar, peaking on July 1, after a report showed that consumer prices in the UK rose unexpectedly in July. Data provided by the Office for National Statistics showed that consumer prices rose in July by 0.1 percent year on year. Recall that in June, prices remained unchanged. Economists had expected inflation to remain zero in July after a slight increase in May and fall below zero for the first time since 1960 in April. On a monthly basis, inflation fell by 0.2 percent, which was slightly less than the forecast of -0.3 per cent. "A slight annual increase is mainly due to the smaller reduction in prices for clothing in July compared with the same period last year - said the expert ONS Richard Campbell. - Meanwhile, prices for food and fuel have continued to fall, which helped to contain future rise in inflation" Also, the data showed that the underlying rate of inflation, which excludes prices of energy, food, alcohol and tobacco, rose to 1.2 percent in July (the most significant annual growth in February), compared with 0.8 percent in June. Policy of the Bank of England are increasingly looking at this figure to estimate the time of the first rate increase in seven years. The ONS also reported that producer prices fell by 1.6 percent in annual terms, compared with economists' forecasts at 1.5 percent. We remind investors have recently revised the initial expectations the Bank of England rate hike after last month only one of the members of the Monetary Policy voted in favor of raising interest rates.

The yen strengthened slightly against the dollar, updating yesterday's high against the backdrop of risk aversion because of another collapse of Chinese stocks. Today, Shanghai Composite Index fell more than 6%, despite a large injection of liquidity into the financial system by the central bank of China, which signals a raise concerns in Beijing about capital outflows after the recent weakening of the yuan. Analysts fear that the weak yuan a negative impact on earnings of exporters in Europe and especially in Germany.

Support for the yen also had comments advisor Japanese Prime Minister E. Honda, who said that at this stage the economy is not in need of expansion incentives. According to him, "the negative effect of increasing the sales tax is extinguished, but the rate of increase in wages fall short of expectations, while more expensive food. He added that the Bank of Japan should expand the policy easing if inflation expectations decline, noting that the Japanese economy will require 3-3.5 trillion. yen to support the growth of consumption and prevent further economic contraction.