Dollar up on strong housing data but trading cautious ahead of Yellen

Currency markets were stuck in a summer lull as the absence of any major data and cautiousness ahead of Yellen’s speech later this week kept trading subdued in Wednesday’s Asian session.

The dollar was lifted from stronger-than-expected new home sales figures out of the US yesterday with investors shrugging off a slightly weaker-than-expected flash manufacturing PMI reading. The greenback spiked below 100 yen several times before edging higher after the housing data. It was last trading around 100.30 yen in today’s Asian session.

The dollar is likely to remain within its recent narrow range until Fed Chair Janet Yellen’s speech at the Jackson Hole Symposium on Friday where she is expected to provide an updated outlook on the US economy. Recent hawkish remarks from senior Fed officials have revived talk of a rate hike before the year end but markets are yet unconvinced that the Fed will move at all in 2016.

The euro and the pound were pressured from the stronger dollar today. The single currency dropped below 1.13 dollars in Asian trading but its losses were limited as yesterday’s flash PMI data further reinforced the view that the Eurozone recovery remains on track despite the Brexit shock.

The pound was also supported from growing views that the Brexit impact on the UK economy will be less than initially feared. Sterling was unable to hold on to 1.32 dollars after rising above the level yesterday for the first time since early August but was trading not too far below it at 1.3177 dollars in late Asian session today.

Weaker commodity prices and a firmer dollar weighed on the Australian and New Zealand dollars today. The aussie was struggling to hold on to the 0.76 level against the US dollar, while the kiwi was back below the 0.73 level. The kiwi was further pressured by worse-than-expected July trade data for New Zealand out earlier today.

Crude oil prices were down sharply on Wednesday as a surprise build in US crude stocks dragged prices lower again. According to data from the American Petroleum Institute out yesterday, US crude stocks unexpectedly rose by 4.5 million barrels last week. WTI oil futures were last trading at $47.26 a barrel, down 1.8% on the day.

The rest of the day is expected to be relatively quiet with the only major data to come out of the US, which will include existing home sales and the weekly oil inventory numbers from the US Energy Department.