US Dollar Edges Lower on Prospects of Economic Measures by China

Edited by Vani Rao

GBP firms up against the USD on UK GDP growth

The US dollar finished lower against the GBP on Friday, March 28, 2014, amid rising prospects of sooner-than-expected economic recovery in the UK, coupled with the economic stimulus in China that boosted the demand for the GBP.

The GBP firmed up against the USD on Friday after a report showed that UK fourth-quarter 2013 gross domestic product (GDP) rose 0.7%, meeting analyst expectations. However, further gains in the GBP were halted by the positive US personal spending data, which came in line with the market forecasts. The US personal spending increased 0.3% in February.

Meanwhile, China’s premier Li Keqiang stated on Friday that the country will implement certain policies to counter the recent economic instability in the country.

The GBP/USD pair traded between 1.6599 and 1.6651, before closing Friday’s trading session at 1.6638, up 0.20%, as shown in the graph below.

At the time of final reporting, the pair was trading at 1.6641, down 0.03%.

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The UK and the US are scheduled to release key data in the forthcoming week, which are likely to cause significant movements in the currency market. Analysts will be looking forward to changes in the relative price of the USD and the GBP in the coming week, in the light of key data releases by both the economies. However, crucial data releases by both the US and the UK are expected to have a significant impact on the US dollar in the weak ahead.

On March 31, the UK is expected to release data on net lending to individuals.

On Tuesday, April 1, the UK is slated to produce data on manufacturing activity. Meanwhile, in the US, the Institute of Supply Management (ISM) will publish a report on the country’s manufacturing growth.

On Wednesday, April 2, the UK is scheduled to release private sector data on housing prices, along with a report on construction activity. Meanwhile, the US is to publish the Automatic Data Processing (ADP) report on private sector job creation.

On Thursday, April 3, the UK will release data on service sector growth, while the Bank of England (BoE) will announce its benchmark interest rates. On the same day, the US will produce its weekly data on jobless claims along with the data on trade balance.

Finally, on Friday, April 4, the US will release government data on non-farm payrolls and the unemployment rate.

EUR/USD

The US dollar edged lower against the Euro on Friday, March 28, 2014. The Euro recovered from its one-month low against the US dollar on Friday following a positive market sentiment after China’s premier Li Keqiang indicated that the government may introduce certain policy measures to address the recent economic instability.

On Friday, March 28, 2014, the EUR/USD pair fluctuated between 1.3705 and 1.3772, before closing Friday’s trading session 0.07% higher at 1.3752, as indicated in the graph below.

At the time of last reporting, the EUR/USD pair was trading 0.01% higher at 1.3755.

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The Eurozone and the US are scheduled to release key data next week, which is likely to cause significant movements in the currency market globally. Analysts will be looking forward to changes in the relative price of the USD and the Euro in the coming week in the light of key data releases in the Eurozone.

On Monday, March 31, 2014, the Eurozone is expected to release preliminary data on consumer price inflation.

On April 1, the Eurozone will produce data on unemployment rates, while Germany will release data on the number of people unemployed. Meanwhile, Italy and Spain will release reports on their manufacturing activity.

On April 2, Spain will release data on unemployment.

On Thursday, April 3, the Eurozone is expected to release data on retail sales. Meanwhile, Spain and Italy are to publish data on service sector activity. On the same day, the European Central Bank (ECB) is slated to announce its benchmark interest rate, to be followed by a press conference with President Mario Draghi.

Finally, on April 4, Germany will publish data on factory orders.

USD/JPY

The Japanese yen slipped to its two-week low against the US dollar on Friday, March 28, 2014, following China’s premiere indicating that the country is likely resort to economic measures to stimulate its economy.

The demand for safe haven further declined on the back of reports showing that the household spending in Japan fell 2.5% in February, against expectations of a 0.1% increase. For the week ended March 28, 2014, the USD/JPY pair rose 0.57%.

During the trading session on March 28, 2014, the pair oscillated between 102.04 and 102.98, before finishing the day 0.64% higher at 102.83, as shown in the graph below.

At the time of reporting, USD/JPY was trading at 102.85, down 0.05%.

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Analysts will be looking forward to the currency fluctuations between the USD/JPY pair ahead of data releases by Japan and the US in the coming week. To start the week, on March 31, Japan is scheduled to release preliminary data on industrial production.

On April 1, Japan is expected to publish data on average cash earnings as well as the Tankan manufacturing and non-manufacturing index.

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