Verified by Joma Jose
Edited by Vani Rao
Harsh weather conditions play spoilsport on the US dollar
Weak home sales data and the harsh weather conditions played havoc, causing the US dollar to slump against the Euro during the week ended 21 February 2014. The US dollar slid against Euro on Friday, following the announcement of weak US home sales data and impact of severe winters on the economic recovery.
Home sales declined by larger than forecast of 5.1% in January, its lowest level in the past 18 months. The EUR/USD finished Friday’s session at 1.3739, up 0.15%. For the week, the Euro gained 0.26%, as shown in the graph below
In the week ahead, the Eurozone and the US are slated to release key data, which is likely to cause significant movements in the currency market. Analysts will be looking forward to changes in the relative price of the US and the Euro in the coming week in the light of release of key data by both the economies. However, crucial data releases by both the US and Europe are expected to have a significant impact on the US dollar in the weak ahead.
On Monday, February 24, the Eurozone is to release revised data on consumer price inflation, while the Ifo Institute for Economic Research is to publish a report on the German business climate.
The European Commission will also publish its economic forecasts for the European Union member states. Meanwhile, the US is expected to release data on consumer confidence and a private sector report on house price inflation on Tuesday, February 25.
On February 26, Germany is expected to release a report on the Gfk consumer climate. At the same time, the US will announce data on new home sales, a leading indicator of demand in the housing market.
On February 27, the European Commission is to publish its economic forecasts for European Union member states. The US is to announce data on durable goods orders, and the weekly report on initial jobless claims.
Finally, on Friday, 28 February, the Eurozone will release preliminary data on consumer inflation and a separate report on the unemployment rate across the currency bloc. Germany is scheduled to publish data on retail sales. The US will round up the week with revised data on fourth-quarter growth, a report on manufacturing activity in the Chicago region, revised data on consumer sentiment, and private sector data on pending home sales.
Unlike the Euro, the British pound sterling ended the week lower against the dollar on Friday. The drop in the pound sterling was triggered following the reports on UK retail sales. The retails sales declined more sharply than anticipated in January, raising doubts about the economic recovery of the country. The drop of 1.5% in retail sales was the largest since April 2012, after strong retail sales growth of 2.5% in December. The GBP/USD was down 0.22% to 1.6614 at the close of trading, and ended the week down 0.62%, as shown in the graph below.
Also, Wednesday’s official data showed that the UK unemployment rate rose to 7.2% in the three months to December from 7.1% in the previous three months. Analysts had expected the jobless rate to remain unchanged.
The UK and the US are scheduled to release key data in the next week, which is likely to cause significant movements in the currency market globally. Analysts will be looking forward to change in relative price of the US and the GBP in the coming week in the light of release of key data by both these economies.
On Tuesday, February 25, the UK is expected to release private sector reports on mortgage approvals and retail sales. On the same day, the US is to release data on consumer confidence and a private sector report on house price inflation.
The UK will also release revised data on fourth-quarter economic growth, as well as preliminary data on business investment. Meanwhile, the US will announce data on new home sales, a leading indicator of demand in the housing market. Both these data will be announced on February 26.
The USD/JPY fluctuated between small gains and losses during Asian morning trade on Monday, 24 February 2014. The pair hit a three-week high of 102.82 on Friday, despite weaker-than-expected data on existing US home sales, as shown in the graph below The pair ended the week 0.41% higher. At the time of reporting, USD/JPY was trading at 102.29, down 0.21%. This change was driven by the quantitative easing programs undertaken by the US and Japan. The dollar was trading higher than yen amid the expectations that the Fed will continue tapering while Bank of Japan will stick to its quantitative easing program.
Analysts will be looking forward to data releases by the US and Japan on Friday, February 28, with the Japan releasing a series of data, including reports on household spending, retail sales, inflation, and industrial production. Meanwhile, the US will be reporting revised data on fourth-quarter growth, a report on manufacturing activity, consumer sentiment data, and data on home sales.