USD Surges Against Euro on Buoyant Economic Data

Edited by Vani Rao

Surge in USD fuelled by upbeat job data and fall in jobless claims

The US dollar traded near its two-and-a half-month high against the Euro on Thursday, May 15, 2014. The Euro/USD pair hit 1.3649, its lowest since February 27, 2014, during the trading session on Thursday. The weakness in the Euro is mainly attributed to the disappointing gross domestic product (GDP) data, which indicated that the Eurozone’s GDP grew only 0.2% in the first quarter, against expectations of a 0.4% growth. Also, on a year-over-year basis, the Eurozone’s economy expanded only 0.9%, while economists had expected a growth of 1.1%.

In a separate report, Eurostat stated that the annual inflation rate in the Eurozone was unchanged at 0.7% in April, in line with forecasts. However, the inflation rate was below the European Central Bank’s objective of roughly 2% inflation growth.

On the other hand, the US released a series of upbeat data on Thursday, May 15, which further strengthened the demand for the US dollar. According to a report by the US Department of Labor, the number of individuals filing for unemployment benefits fell by 24,000 to 297,000. The data came in ahead of expectations, as analysts had expected jobless claims to fall by 1,000 to 320,000 in the past week.

In a separate report, the Federal Reserve of Philadelphia said that its manufacturing index declined to 15.4 this month, compared to 16.6 in April. However, the data was higher than expectations of 14.0.

During the trading session on Thursday, May 15, 2014, the Euro/USD pair oscillated between 1.3649 and 1.3732, before finishing the day 0.32% lower at 1.3710, as indicated in the graph below. At the time of the last reporting, the Euro/USD pair was trading at 1.3711, up 0.02%.

Source: Bloomberg
Source: Bloomberg

Market experts will keep a close track of the data releases on Friday, May 16, when the US will publish reports on the construction activity, including building permits and housing starts. In addition, the University of Michigan will come up with a preliminary reading on the consumer sentiment index for the month.

GBP/USD

After posting losses in the previous two trading sessions, the GBP rebounded against the US dollar on Thursday, May 15, 2014, on the back of revised economic growth targets. On Wednesday, the Bank of England (BoE) announced that it is expecting economic growth of 2.9% in 2015, up from forecasts of 2.7% in its February report. The bank also stated that the rate of growth this year would remain unchanged at 3.4%. Further, the BoE left its growth and inflation forecasts unchanged in its quarterly inflation report and indicated that it is still not planning to hike interest rates in the near future.

Meanwhile, the release of buoyant economic reports and better-than-expected jobless claims data enabled the US dollar to limit some of its losses against the GBP. According to the US Bureau of Labor Statistics report, the US consumer price index rose to 0.3% in April from 0.2% in March, in line with market projections.

In a separate report, New York Fed announced that its manufacturing index jumped to a more-than-two-year high of 19.01 in May, compared to 1.29 in April, and easily surpassing market projections of 5.00 for this month.

The GBP/USD pair fluctuated between 1.6733 and 1.6806, before finishing Thursday’s session 0.20% higher at 1.6790, as shown in the graph below. At the time of the last reporting, the GBP/USD was trading at 1.6792, up 0.02%.

Source: Bloomberg
Source: Bloomberg

USD/JPY 

The Japanese yen rose against the major currencies, including the US dollar, on Thursday, May 15, 2014, following the release of a stronger-than-expected Q1 GDP report. As per the official report, Japan’s preliminary GDP for Q1 increased to 1.5%, ahead of the expected 1.0% growth. Japanese GDP growth was fuelled by the country’s decision to hike sales tax to 8% from the earlier level of 5% with effect from April 1, 2014.

On Thursday, May 15, the USD/JPY pair fluctuated between 101.32 and 102.11, before settling the day at 101.58, down 0.28%, as shown in the graph below. At the time of final reporting, the USD/JPY was trading at 101.46, down 0.11%.

Source: Bloomberg
Source: Bloomberg

 

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