USD Jumps on Strong Economic Data

Edited by Vani Rao

Euro falls to eight-month low against USD

EUR/USD

The EUR fell to its eight-month low against the US dollar on Friday, July 25, 2014, over the divergence in monetary policy between the European Central Bank (ECB) and other central banks.

The EUR/USD pair ended 0.25% lower at 1.3430 on Friday, July 25, 2014, the lowest level since November 2013, after fluctuating between 1.3419 and 1.3474. The fall in the EUR came after a report showed that Germany’s IFO business climate index declined for the third consecutive month to 108.0, well below estimates of 109.4. The EUR has seen additional pressure since the ECB cut rates to record lows on June 5, 2014, in a bid to hold off the risk of deflation and shore up growth in the region.

Demand for the US dollar continued earlier in the week after Federal Reserve Chair Janet Yellen indicated that the interest rates may rise sooner if the US economy continues to improve as predicted. For the week, the EUR/USD pair was down 0.74%.

At the time of last reporting, the EUR/USD pair was trading at 1.3433, up 0.02%.

Source: Bloomberg
Source: Bloomberg

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

On Monday, July 28, 2014, the US is set to release its report on pending home sales.

On Tuesday, July 29, the US is expected to release its reports on house price inflation and consumer confidence.

On Wednesday, July 30, in the Eurozone, Germany is expected to release data on consumer price inflation. Meanwhile, Spain is set to publish raw estimates on consumer inflation and Q2 economic growth.

On the same day, the US is scheduled to produce data on private sector job creation, as well as a revised data on Q2 GDP growth estimates. Further, the Federal Reserve will announce its federal funds rate and publish its rate statement.

On Thursday, July 31, the Eurozone will publish data on consumer inflation and unemployment. Meanwhile, Germany is expected to publish data on retail sales and unemployment.

On the same day, the US is set to publish its weekly report on initial jobless claims as well as data on manufacturing activity in the Chicago area.

To round off the week on Friday, August 1, the US is expected to report data on non-farm payrolls and unemployment rates. Meanwhile, the Institute of Supply Management will release data on manufacturing activity.

GBP/USD

The GBP fell to a one-month low against the US dollar on Friday, July 25, 2014, on account of upbeat US data and heightened geopolitical tensions that underpinned the demand for the greenback. The GBP/USD pair fell 0.06% to end at 1.6975 on late Friday, hitting the lowest level since June 25, after oscillating between 1.6959 and 1.6996. Furthermore, for the week, the pair declined 0.66%.

During the week, the UK reported positive data on its Q2 GDP. The UK grew 0.8% in the second quarter and its GDP expanded by 3.1% on a YoY basis. The GBP has witnessed almost six-year highs of 1.7190 set on July 15, on account of expectations of a rate hike by the Bank of England.

Meanwhile, the greenback surged against the GBP because of better-than-expected data on durable goods orders for the month of June, which added to signs that the US economy is improving.

At the time of last reporting, the GBP/USD pair was trading flat at 1.6975.

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 US and the GBP in the coming week in the light of key data releases by both these economies. Crucial data releases by both the US and the UK are expected to have a significant impact on the US dollar in the week ahead.

On Tuesday, July 29, the UK is scheduled to release data on net lending.

On Thursday, July 31, the UK is expected to release private sector data on housing price inflation.

On Friday, August 1, the UK is scheduled to release a report on its manufacturing activity.

USD/JPY 

The US dollar posted three-week profits against the Japanese yen on Friday, July 25, 2014, following upbeat US economic data and strong gains against the euro. During the session, the USD/JPY pair traded in a lower range, inching up 0.02% to 101.84 late on Friday.

In the US, most of the economic data has been good so far, supporting a stronger US dollar. However, in Japan, the inflation numbers were higher-than-expected and there was some speculation about the Bank of Japan’s next moves.

At the time of final reporting, the USD/JPY pair was trading at 101.80, down 0.03%.

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 look forward to changes in the relative price of the US and the Japanese yen in the coming week, ahead of key data releases.

On Tuesday, July 29, Japan is set to publish data on retail sales and household spending.

On Wednesday, July 30, Japan is scheduled to produce data on its industrial production.

Also on Thursday, July 31, Japan is expected to publish key data on its average cash earnings.

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