USD Declines on Lower-than-expected Economic Data

Edited by Vani Rao

Euro and GBP lose 0.06% and 0.15%, respectively, against the USD

EUR/USD

The dollar edged higher against the euro on Friday, June 20, 2014, after the Fed announced that it is not raising interest rates in the near future. However, the dollar still ended the week lower against the euro. The EUR/USD ended 0.06% lower at 1.3600 on Friday, June 20, 2014. On a weekly basis, the pair posted a gain of 0.47%.

The Fed said that there was sufficient underlying strength in the US economy to continue with its tapering, following which it trimmed bond purchases by $10 billion a month to $35 billion. Despite this, due to unexpected contractions in the first quarter as a result of harsh winter, the Fed also lowered its GDP forecast for the year to between 2.1% to 2.3% from its earlier predictions of between 2.8% to 3.0%.

At the time of last reporting, the EUR/USD pair was trading at 1.3605, up 0.04%.

Source: Bloomberg
Source: Bloomberg

In the forthcoming week, the UK and the US are scheduled to report series of key data. Currency experts will be keeping a close watch on the following data releases, while framing their trading strategies.

On Monday, June 23, 2014, the Eurozone is expected to release its manufacturing as well as service sector activity reports. However, Germany and France are slated to release individual reports. On the same day, the US is expected to release preliminary data on manufacturing activity and private sector on existing home sales.

On Tuesday, June 24, in the Eurozone, the IFO Institute is expected to release data on the German business climate. Meanwhile, the US is expected to release private sector data on consumer confidence and a report on new home sales.

On Wednesday, June 25, the US is expected to release data on durable goods orders as well as a revised data on Q1 GDP growth.

On Thursday, June 26, the US is expected to release data on inflation linked to personal spending as well as data on personal income and expenditure.

On Friday, June 27, France is expected to publish data on consumer spending. Meanwhile, Germany and Spain are expected to release preliminary data on consumer price inflation.

Meanwhile, to round off the week, the US is scheduled to release revised data on consumer sentiment from the University of Michigan.

GPB/USD

After reaching more than five-year highs, the GBP pulled back against the US dollar on Friday, June 20, 2014. This was mainly on account of expectations of an increase in interest rates by the Bank of England (BoE) on a higher scale than that of other central banks.

On Friday, the GBP/USD pair slipped 0.15% to 1.7013 from highs of 1.7062 reached on the previous day, the strongest level since October 21, 2008. The pair oscillated between 1.7006 and 1.7061 during the same day. However, for the entire week, the pair gained 0.22%.

BoE’s June meeting, which was held on Wednesday, June 18, 2014, sprung a surprise in the way that the financial markets were pricing in a low probability of interest rates rising during the year. On the same day, the greenback remained under pressure after the Federal Reserve indicated that the any revision of interest rates would remain on hold for longer, despite the improving US economic outlook.

At the time of last reporting, the GBP/USD pair was trading at 1.7041, up 0.15%.

Source: Bloomberg
Source: Bloomberg

In the forthcoming week, the UK and the US are scheduled to report series of key data. Currency experts will be keeping a close watch on the following data releases, while framing their trading strategies.

On Monday, June 23, 2014, the US is expected to release its preliminary data on manufacturing activity and private sector data on existing home sales.

On June 24, the US is slated to report private sector data on new home sales and consumer confidence.

On Wednesday, June 25, the UK is expected to release data on private sector retail sales. Meanwhile, the US is expected to release a report on durable goods orders, as well as revised data on Q1 GDP growth.

On June 26, the BoE will announce its financial stability report. Meanwhile, the US is expected to produce its weekly report on personal income and expenditure, along with data on inflation linked to personal spending.

On Friday, June 27, the UK is scheduled to release data on the current account and final data on Q1 GDP growth. Meanwhile, the US is to round off the week with its revised data on consumer sentiment.

USD/JPY 

The US dollar posted marginal gains against the Japanese yen on Friday, June 20, 2014, after the Federal Reserve indicated that despite the improving US economic outlook, interest rates would remain on hold. However, the greenback came under pressure after the June data trailed analysts’ forecasts.

During the session on June 20, 2014, the USD/JPY pair finished at 102.07, up 0.13% from its previous day’s closing of 101.93, as shown in the graph below. For the week ended June 20, 2014, the USD/JPY pair mapped gains of 0.10%.

At the time of final reporting, the USD/JPY pair was trading at 101.96, down 0.12%.

Source: Bloomberg
Source: Bloomberg

The USD/JPY pair is likely to fluctuate ahead of significant data releases by Japan in the coming week. Industry experts will be looking forward to changes in the relative price of the US and the Japanese yen in the coming week, ahead of key data releases.

On Friday, June 27, 2014, Japan is scheduled to release key data on retail sales, household spending, and inflation.

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