US Dollar Stable Amidst Strong Industrial Data and Russian Political Events

Edited by Vani Rao

Euro and GBP fluctuate between gains and losses against USD; USD/JPY gains 0.27%

The US dollar surrendered its gains against the Euro on Monday, March 17, 2014, and the EUR/USD pair oscillated between 1.3880 and 1.3940, before closing Monday’s trading session at 1.3922.

The upbeat US industrial production data lent support to the dollar; industrial production rose 0.6% in February, exceeding forecasts for a 0.1% gain.

Meanwhile, the Eurozone reported its official data on consumer price inflation, which came below the industry expectations. The consumer price inflation rose 0.3% last month, below the expected forecast for a 0.4% increase.

At the time of last reporting, the EUR/USD pair was trading at 1.3929, up 0.04%.

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The Eurozone and the US are scheduled to release key data that are likely to track movements in the currency markets between two economies. On Tuesday, March 18, 2014, the ZEW Institute is to release report on German economic sentiment. Meanwhile, the US is expected to release data on consumer inflation, in addition to reports on building permits and housing starts.

On Wednesday, March 19, 2014, the Federal Reserve will announce its federal funds rate and publish economic forecasts for inflation and growth. The announcement will be followed by a press conference with Chair Janet Yellen.

On Thursday, March 20, 2014, Germany is to release data on producer price inflation. Meanwhile, the US will release its weekly job report, in addition to data on home sales and manufacturing activity in the Philadelphia region.

Finally, on Friday, March 21, 2014, the Eurozone is scheduled to release data on the current account.

GBP/USD

The GBP held stable against the US dollar on Monday, March 17, 2014. The GBP/USD pair traded in a range of 1.6605 and 1.6656, before closing Monday’s trading session at 1.6637. For the week ended March 14, 2014, the GBP/USD edged 0.05% higher.

The movement in the GBP/USD pair was range bound on Friday and on Monday, as investors weighed weak economic reports from China, coupled with the mounting tensions between Russia and the West, ahead of Sunday’s polls in Ukraine.

Meanwhile in the US, better-than-expected industrial production data provided support to the US dollar. As per the reports, industrial production rose 0.6% in February, outpacing the estimates for a 0.1% gain. In another report, the Federal Reserve Bank of New York reported that its Empire State Manufacturing Index increased to 5.6 this month, from 4.5 in February, bettering expectations for a rise to 6.

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Analysts will be looking forward to a change in the relative price of the GBP/USD post the release of key data slated to be announced in the coming week.

On Tuesday, March 18, 2014, the US will release data on consumer inflation. Meanwhile, Bank of England’s Governor will speak at an event in London.

On Wednesday, March 19, 2014, the Federal Reserve is to announce its federal funds rate and will publish inflation and growth estimates. Meanwhile, the UK will report data on employment, in addition to data on average earnings and public sector borrowing, and the Bank of England will publish the minutes of its latest policy setting.

On Thursday, March 20, 2014, the US will publish the weekly report on jobless claims. Meanwhile, the UK is to release private sector data on industrial orders. Additionally, the UK government will make its annual budget statement.

To round off the week on March 21, the UK will announce data on public sector net borrowing.

USD/JPY

The USD/JPY pair gained 0.27% on Monday, as investors continued to keep a close watch on the geo-political events in Russia, after over 90% of voters in Crimea declared independence from Ukraine and re-join Russia.

The USD/JPY pair closed Monday’s session at 101.77, after oscillating between 101.28 and 101.87, as shown in the graph below. At the time of final reporting, the USD/JPY pair was trading at 101.8080, up 0.03%.

For the week ended March 14, the pair lost 1.84%, its largest weekly decline since January.

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Moving forward, trading in the USD/JPY pair is expected to be volatile, as the political situation in Russia and key data releases by the US and Japan are likely to trigger currency fluctuations between the pair.

Analysts will be looking forward to the data release on Wednesday, March 19, when Japan will release data on its trade balance. On the same day, the Federal Reserve will declare its federal funds rate and publish economic forecasts.

On Thursday, March 20, Bank of Japan Governor, Haruhiko Kuroda, will address an event in Tokyo. Meanwhile, the US Department of Labor will publish its report on jobless claims.

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