USD Trades Close to Five-year High against GBP

Edited by Vani Rao

Euro and GBP fell 0.62% and 0.50%, respectively, against the USD

The US dollar traded stronger against the Euro on Friday, May 9, 2014, as investors factored in the prospects of sooner-than-expected monetary easing by the European Central Bank (ECB). The Euro slid from its two-and-a-half year high against the US dollar on Thursday, May 8, 2014, after the ECB President Mario Draghi announced the implementation of economic measures to check falling inflation rates. The EUR/USD pair extended its losses to a second consecutive trading session and slid to its one-month lows against the US dollar.

On Friday, May 9, 2014, the EUR/USD pair fluctuated between 1.3746 and 1.3844, before closing Friday’s trading session 0.62% lower at 1.3758, as indicated in the graph below.

At the time of last reporting, the EUR/USD pair was trading 0.04% higher at 1.3765.

Source: Bloomberg
Source: Bloomberg

The Eurozone and the US are scheduled to release key data in the coming week, which are 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 both these economies.

On Monday, May 12, 2014, the US will release data on the federal budget balance.

On May 13, in the Eurozone, the Centre for European Economic Research (ZEW) Institute is expected to release a key report on the German economic sentiment, an important measure of economic growth. On the same day, the US will publish reports on import prices and business inventories as well as data on retail sales.

On May 14, the Eurozone will release data on industrial production, while the US will announce data on producer price inflation.

On Thursday, May 15, the Eurozone is slated to announce preliminary data on the first quarter gross domestic product (GDP), an important measure of economic activity and growth. In addition, the Eurozone is also expected to publish revised data on consumer inflation. Meanwhile, the US is expected to publish a series of key reports, including its weekly report on initial jobless claims, industrial production and consumer inflation, as well as a report on the manufacturing activity in the Philadelphia region.

Finally, on May 16, 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

The US dollar ended the week close to its five-yearly high against the GBP on Friday, May 9, 2014. The GBP slipped against the US dollar on Friday despite the release of promising British factory output data, which grew at its fastest rate in almost four years during the first quarter of 2014. The factory output grew 1.4% in Q1 as compared to 0.6% in Q4 2013. However, the GBP managed to curtail some of its losses amid prospects that the Bank of England (BoE) might raise interest rates as early as next year. During the week, the GBP/USD hit 1.6994, its highest level since August 2009.

The GBP/USD pair traded between 1.6832 and 1.6939, before closing Friday’s trading session at 1.6851, down 0.50%, as indicated in the graph below. For the week ended May 9, the GBP/USD pair fell by 0.11%.

At the time of final reporting the GBP/USD pair was trading at 1.6858, down 0.01%.

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 May 13, the UK is expected to release private sector data on retail sales.

On Wednesday, May 14, the UK is scheduled to release important official data on the unemployment rate and average earnings. In addition, the BoE will publish its quarterly inflation report, which will be followed by a press conference from Governor Mark Carney, discussing the details of the report.

USD/JPY 

The US dollar stayed higher against the Japanese yen on Friday, May 9, 2014. However, the prevailing political concerns in Ukraine restricted gains in the US dollar and provided support to the safe haven. The USD/JPY pair traded near its three-week low of 101.43, following remarks by Fed Chair Janet Yellen on May 7 indicating the implementation of monetary measures to propel growth of the US economy.

In addition, investors adapted a cautious stance ahead of Japanese data on bank lending rates and current account balance to be announced on Monday, May 12, 2014.

During the session on May 9, 2014, the pair oscillated between 101.55 and 101.86, before finishing the day 0.26% higher at an intra-day high of 101.86, as shown in the graph below.

At the time of reporting, USD/JPY was trading at 101.90, up 0.01%.

Source: Bloomberg
Source: Bloomberg

Analysts will be looking forward to the currency fluctuations between the USD/JPY pair ahead of data releases by Japan in the coming week.

On May 12, Japan is scheduled to release key data relating to its current account.

On May 15, Japan will report preliminary data on first-quarter GDP, the leading measure of economic activity and growth. Japan is to release a report on tertiary industry activity. On the same day, Bank of Japan (BoJ) Governor Haruhiko Kuroda will address an event in Tokyo.

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