USD Under Pressure after Fed’s Announcement

Edited by Vani Rao

Fed to end its asset purchase program this October

EUR/USD

The US dollar almost unchanged against the euro on Friday, July 11, 2014, owing to easing of concerns over a major Portuguese lender, curbing safe haven demand for the greenback. The EUR/USD ended 0.03% higher at 1.3608 on Friday, July 11, 2014, after fluctuating between 1.3590 and 1.3623. Portugal’s largest lender, Banco Espirito Santo, fuelled a sharp sell-off in the markets on Thursday, July 10, 2014.However, concerns eased after Portugal’s central bank said on Friday that it was satisfied over able to fulfil its capital requirements.

The dollar came under pressure earlier in the week, after the Wednesday’s minutes of the Fed’s latest meeting showed that officials agreed to end the bank’s asset purchase program in the month of October this year. However, the Fed revealed that the interest rates are unlikely to rise anytime soon.

At the time of last reporting, the EUR/USD pair was trading at 1.3601, down 0.04%.

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 14, 2014, the Eurozone is set to release data on industrial production.

On Tuesday, July 15, 2014, the Centre for European Economic Research (ZEW) is expected to release its closely watched report on Germany’s consumer sentiment, a leading indicator of economic health. Meanwhile, the US is scheduled to release data on retail sales, consumer spending, and data on import prices, business inventories, and manufacturing activity.

On Wednesday, July 16, 2014, the US is to publish reports on producer price inflation and industrial production. Meanwhile, Fed Chair Janet Yellen and Bank of England (BoE) Governor Mark Carney will testify on the monetary policy to the House Financial Committee.

On Thursday, July 17, the Eurozone is expected to release data on consumer prices. Meanwhile, the US is set to publish reports on initial jobless claims, housing starts, building permits, and the Philly Fed manufacturing index.

To round off the week on Friday, July 18, the US is expected to report preliminary data from the University of Michigan consumer sentiment index.

GBP/USD

After a weak UK construction data, the pound slipped lower against the dollar on Friday, July 11, 2014. However, it remained above the supporting level of 1.71, almost close to a six-year high.

The GBP/USD pair slid 0.15% to end at 1.7116, on late Friday, to end the week down 0.27%. The pair oscillated between 1.7097 and 1.7149 during the same day. The report came after data showed that the UK construction output declined by 1.1% in May, the biggest decline since February. Also, manufacturing production fell by 1.3% in May, the largest decline in 16 months. However, the construction output was up 3.5% on a YoY basis.

The BoE left interest rates unchanged at 0.5% in its policy meeting on Thursday, and kept the size of its asset purchase program unchanged at £375 billion.

At the time of last reporting, the GBP/USD pair was trading at 1.7114, up 0.05%.

Source: Bloomberg
Source: Bloomberg

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

On Tuesday, July 15, the UK is scheduled to release data on retail sales, as well as a report on consumer price inflation.

On Wednesday, July 16, the UK is expected to release data on the change in the number of people employed, unemployment rate, as well as data on average earnings.

USD/JPY 

The US dollar posted marginal losses against the Japanese yen on Friday, July 11, 2014, on prospects that the US rates will remain on hold for longer and renewed concerns over the European banking sector’s bolstered demand for the safe haven Japanese currency.

During the session, the USD/JPY pair was almost unchanged, as shown in the graph below. The pair finished at 101.30 late Friday, holding above Thursday’s almost two-month low of 101.05. However, for the week ended July 11, 2014, the pair mapped a loss of 0.75%.

At the time of final reporting, the USD/JPY pair was trading at 101.36, up 0.01%.

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 15, 2014, the Bank of Japan (BoJ) is scheduled to announce its benchmark interest rate and publish its rate statement, which outlines the economic conditions and the factors affecting the monetary policy decision.

On Friday, July 18, BoJ is expected to publish the minutes on its monetary policy meeting, which contain valuable insights into economic conditions from the bank’s perspective.

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