USD Rises Against Euro on Weaker Eurozone Growth Data

Edited by Vani Rao

GBP/USD and USD/JPY edge higher against the USD

The US dollar firmed up against the Euro on Friday, May 16, 2014, following the release of weaker-than-expected Q1 FY2014 growth data by Eurozone on Thursday, May 15, 2014. A report showed that Eurozone’s Q1 gross domestic product (GDP) grew only 0.2%, trailing analyst expectations of a 0.4% growth. Moreover, on a year-over-year basis, the Eurozone’s economy expanded only 0.9%, much lesser than the anticipated growth of 1.1%. The lacklustre GDP report has raised prospects of an easing of its monetary policy by the European Central Bank at its next meeting in June, in order to fuel recovery in the Eurozone.

Meanwhile, on May 16, 2014, the US released data on housing starts and the University of Michigan came up with consumer sentiment index for the month.

The US Department of Commerce reported that the housing starts rose 13.2% in April, after a 2.0% increase in March, indicating that the economy is improving from the impact of inclement winter weather. However, positive US housing data was offset by a lower-than-expected consumer confidence report. The University of Michigan reported that the consumer sentiment index for May declined to 81.8, compared with 84.1 in April. Analysts had expected the index to reach 84.5.

The EUR/USD pair oscillated between 1.3685 and 1.3726, before closing Friday’s trading session at 1.3694, down 0.17%, as shown in the graph below. For the week ended May 16, 2014, the EUR/USD pair lost 0.45%.

At the time of final reporting, the EUR/USD pair was trading at 1.3703, up 0.07%.

Source: Bloomberg
Source: Bloomberg

The Eurozone and the US are scheduled to release key data in the coming week, which is likely to cause significant movements in the currency market globally. 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 key data releases by Eurozone and the US.

On Monday, May 19, 2014, Germany’s Bundesbank President Jens Weidmann will address an event in Frankfurt. On the same day, the German central bank is scheduled to publish its monthly report.

On May 20, 2014, in the Eurozone, Germany will release data on producer price inflation. Meanwhile, Charles Plosser, President of the US Federal Reserve Bank of Philadelphia will express his opinion on economic outlook, and William Dudley, President of the Federal Reserve Bank of New York, will speak on regional economic conditions.

On Wednesday, May 21, the Eurozone is slated to publish data on its current account. Meanwhile, in the US, Fed Chair Janet Yellen is scheduled to speak at an event in New York. Later in the day, the Fed is to publish the minutes of its latest meeting.

On Thursday, May 22, the Eurozone is expected to release data on manufacturing and service sector activity, whereas Germany and France are to release individual reports. Meanwhile, the US will come up with its weekly unemployment report and private sector data on existing home sales.

To round of the week, on May 23, in the Eurozone, the Ifo Institute is to publish data on German business climate. Also, the US is to report data on new homes sales.

GBP/USD

The GBP recovered from its one-month low to finish higher against the US dollar on Friday, May 16, 2014. However, the gains in the GBP were kept in check by the release of mixed US economic data.

The US reported its strongest housing data in five months after housing starts rose 13.2% in April. On the other hand, the University of Michigan’s consumer sentiment index for the month of May came in at 81.8, against analyst estimates of 84.5.

On Friday, May 16, 2014, the GBP/USD pair fluctuated between 1.6784 and 1.6841, before closing Friday’s trading session 0.12% higher at 1.6811, as indicated in the graph below. However, for the week ending May 16, the GBP/USD pair fell by 0.35%.

At the time of last reporting, the GBP/USD pair was trading 0.06% higher at 1.6824.

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 the economies. However, crucial data releases by both the US and the UK are expected to have a significant impact on the US dollar in the weak ahead.

On May, 20, 2014, the UK is expected to release data on consumer price inflation.

On Wednesday, May 21, the UK is expected to release data on retail sales, which accounts for the majority of overall economic activity. Meanwhile, the Bank of England will publish the minutes of its May meeting.

On Thursday, May 22, the UK will release series of key data including the revised data on Q1 economic growth, reports on business investment, and public sector borrowing. In addition, the UK is expected to report private sector data on industrial order expectations.

USD/JPY

The Japanese yen edged higher against the US dollar on Friday, May 16, 2014, on the back of the mixed economic data reported by the US. The US dollar briefly edged up against the Japanese yen during the session on Friday, following the release of upbeat housing data, but the lacklustre consumer sentiment index report from University of Michigan triggered a weakness in the USD/JPY pair.

During the trading session on May 16, 2014, the pair oscillated between 101.36 and 101.67, before finishing the day 0.05% lower at 101.50, as shown in the graph below.

At the time of reporting, USD/JPY was trading at 101.41, down 0.11%.

Source: Bloomberg
Source: Bloomberg

For the coming week, Japan will report key data releases, which are likely to cause currency fluctuations between the USD/JPY pair. Market experts will be keeping a close watch on following events, before framing their trading strategies. To start the week, on May 19, Japan is scheduled to release a report on core machinery orders.

On Wednesday, May 21, the Bank of Japan is expected to announce its benchmark interest rate and publish its monetary policy statement. The announcement is to be followed by a press conference. In addition, Japan is slated to publish data on its trade balance.

Be the first to comment

Leave a Reply

Your email address will not be published.


*