US Dollar Marches on Back of Solid Housing Data

Edited by Vani Rao

USD gains 0.18% and 0.25%, respectively, against the Euro and GBP

The US dollar rose to its three-month high against the Euro on Friday, May 23, 2014, following the release of better-than-expected US housing data. The US Department of Commerce reported that sales of new homes rose 6.4% to 433,000 in April, compared with 407,000 in March. Analysts were expecting new home sales to increase by 425,000. Another major factor for the decline of the Euro was the disappointing business sentiment data reported by Germany.

The losses in the Euro widened after a report showed that the German Ifo declined from 111.2 in April to 110.4 in May, its lowest reading this year, indicating the sluggish pace of economic activity in the Eurozone. The lacklustre German business climate index data raised expectations for monetary easing by the European Central Bank as early as its upcoming meeting in June.

On Friday, May 23, 2014, the EUR/USD pair fluctuated between 1.3616 and 1.3654, before closing Friday’s trading session 0.18% lower at 1.3629, as indicated in the graph below. For the week ended Friday, May 23, the US dollar rose 0.60% against the Euro.

At the time of last reporting, the EUR/USD pair was trading at 1.3656.

Source: Bloomberg
Source: Bloomberg

The Eurozone and the US are expected to announce important data in the next 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 US and the Euro in the coming week factoring in the key data releases by both these economies.

On Tuesday, May 27, 2014, the European Central Bank President Mario Draghi is expected to address an event in Portugal. Meanwhile, the US will publish data on housing price inflation, durable goods orders, and consumer confidence.

On May 28, in the Eurozone, Germany is expected to publish a report on unemployment claims. Also, market research group Gfk is scheduled to publish a report on the German consumer climate. In addition, France is expected to release data on consumer spending. Also, the Eurozone is likely to announce data on money supply and private loans.

On May 29, the US is expected to release revised data on Q1 Gross Domestic Product as well as its weekly report on initial jobless claims.

Finally, on May 30, in the Eurozone, Germany is expected to release a report on retail sales, the government measure of consumer spending. Meanwhile, the US will announce revised data on consumer sentiment put together by the University of Michigan. In addition, the US will publish data on personal income and spending.

GBP/USD

The GBP/USD pair snapped most of its gains from the previous two trading sessions on Friday, May 23, 2014, as robust housing data from the US boosted demand for the dollar against the GBP. However, earlier during the week on Wednesday, May 21, 2014, the GBP rose 0.36% against the US dollar, after UK retail sales jumped in April, raising optimism about the broader economic recovery.

The GBP/USD pair traded between 1.6813 and 1.6876, before settling Friday’s trading session at 1.6832, down 0.25%.

At the time of final reporting, the GBP/USD pair was trading at 1.6862, up 0.11%.

Source: Bloomberg
Source: Bloomberg

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 GBP/USD pair in the coming week in the light of key data releases by both these economies.

On May 27, the UK is to publish a private sector report on mortgage approvals.

On May 28, the UK is scheduled to release publish private sector data on retail sales.

USD/JPY

The US dollar also finished higher against the yen on Friday, May 23, 2014, as the demand for the US dollar received support from the upbeat housing data, which came in ahead of analyst expectations. Earlier during the week, on Wednesday, the US dollar had fallen to its three-and-a-half month low against the Japanese yen as expectations for stimulus by the Bank of Japan diminished. During its two-day policy meeting, the bank concluded that its stimulus program is functioning as per plans with Japan showing signs of recovery. Moreover, a decline in the US Treasury rates pushed the dollar lower against the safe haven.

During the session on May 23, 2014, the pair oscillated between 101.59 and 102.01, before finishing the day 0.19% higher at 101.97, as shown in the graph below. For the week ending May 23, the USD/JPY pair rose 0.49%.

At the time of last reporting, the USD/JPY pair was trading at 101.92.

Source: Bloomberg
Source: Bloomberg

Trading experts will be scrutinizing the currency fluctuations between the USD/JPY pair ahead of data releases by Japan and the US in the coming week. On May 30, Japan is scheduled to announce series of key data.

On Wednesday, May 28, Bank of Japan Governor Haruhiko Kuroda is scheduled to address an event in Tokyo.

On Thursday, May 29, Japan is to publish data on retail sales, the government measure of consumer spending.

To conclude the week, on May 30, Japan will release preliminary data on industrial production, along with reports on household spending and inflation.

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