Forex Asia Review – Aussie falls after weak China manufacturing data

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The Euro edged up against the Dollar to its highest level since a week ago as investor confidence grows on expectations that EU leaders will come to some agreement over dealing with Greek debt. German Chancellor Angela Merkel and French President Nicolas Sarkozy mentioned they reached a joint position on the Greek debt issue and EU President Herman Van Rompuy will present this Franco-German position at the summit in Brussels later today. EURUSD rose 65 pips in the session to hit a high of 1.4273 from a low of 1.4208.

Sterling rose against the Dollar for most of the session in anticipation of U.K. Retail spending data due out later today. Retail spending is projected to increase 0.5 percent in May from a previous decline of 1.6 pct and the rebound in household consumption should spark a bullish reaction in the British Pound as it remains one of the leading drivers of growth. However, investors will remain cautious since the Pound may face additional headwinds over the near-term speculation for a rate hike later this year has mostly been dismissed. GBPUSD advanced to 1.6172 from the 1.6150 open.

The Japanese Yen strengthened against the Dollar as the Ministry of Finance reported Japan’s trade balance improved. The report showed a recovery in the manufacturing industry, which means supply constraints are definitely easing. Exports fell less than forecasted, giving evidence the world’s third-largest economy is emerging from a slowdown after the March 11 earthquake and tsunami. Exports decreased 1.6 percent in June from a year earlier, versus predictions for a 4.1 pct decline, the slowest fall in four months compared to May’s 10.3 percent drop. USDJPY fell to a session low of 78.60 from a high of 78.89.

The Australian Dollar fell against the U.S. Dollar following National Australia Bank’s business survey for April-June. The survey business confidence declined significantly, and employment growth slowed while forward orders also slowed down. The sluggish growth will cement the view that the RBA will not raise interest rates any time soon, especially since Wednesday’s MI Leading Index release was well below the trend. The index predicts the direction of the economy in the next three to nine months. Meanwhile, China data released today added to evidence that growth in the world’s second-largest economy is slowing. Chinese HSBC Flash Manufacturing Index came out lower than previous figure. China is a major trading partner of Australia. AUDUSD fell from highs of 1.0772 to lows of 1.0703.

Gold prices crawled up only slightly in Asia as investors are waiting to see what the outcome will be after the EU leaders summit and what type of deal will be reached to tackle the Greek debt crisis. Also markets are waiting on a U.S. debt deal as well. If progress is made on both sides of the Atlantic on tacking their sovereign debt issues, then demand for the safe haven investment will decline. Gold gained $2 in Asian trading, hitting a high of $1, 603.01 from the open of $1,600.98.

Note: Daylight Saving Time is in effect for GMT