The US currency is under pressure again. According to statistics, economic recovery of the United States is slowing down, bringing about the negative moods towards the greenback. Besides that, news from Europe stole the spotlight. After Spain successfully sold its bonds, investors felt encouraged that indebted nations can hold their own ground.
Fed statements that the prospective for the US economic recovery is changing for the worse proved to be correct. Increasing number of jobless claims, the US Producer Price Index fall (0,5% in June), inflationary pressure decrease, and considerable manufacturing activity slowdown in New York and Philadelphia discredited dollar.
New data on consumer inflation is being released today. Consumer Price Index (CPI) is expected to gain 0.1% m/m and 1.2% y/y after earlier -0,2% m/m and 2.0% y/y.
If the data turns out to be below expectations, the buck will sell out again. The Consumer Confidence Index from Michigan University is also going to draw everybody’s attention. If it drops, the greenback will extend its losses.
EUR
The euro has hit a two-month high verses dollar during a Thursday session, making a 200-point profit against the buck. An auction in Spain, where its government bonds were successfully sold out, assured the investors that Europe is still able to tame the deficits, which restricts economic growth. It allowed so-called “PIIGS” countries to get back on the right track and begin to attract capital in the open market.
As for the EU’s current unemployment rate, it still remains at a 12-year high (close to 10%). Today there are only few messages on the EU’s economy coming out. External trade main release warns about a possible trade balance surplus decrease from 1.6 to 1.4 billion. European bank stress tests are in focus too. The results will be issued today.
GBP
The British pound was left behind the euro during the last session and is now consolidating almost 200 pips against dollar. Negative data released on the dollar opened the sterling a path to new recent highs. There haven’t been very many statistics from the “Isles” recently. Even though David Miles, the Bank of England policymaker, stated it was not reasonable to raise interest rates in Britain, it put no pressure on the pound. Today, we are not expecting any breaking news from Great Britain either. The technical picture can influence the pound in a way that profit taking remains at strong resistance levels.
JPY
The Japanese yen strengthened against the US dollar on Thursday’s session, reaching annual high because of the US poor economic recovery rates on the one hand and a positive picture of Japanese economy on the other.
The Bank of Japan announced that it decided to leave key interest rates unchanged and Shirakawa, its Governor, made a statement that the economy is on a recovery track and the Japanese currency is strengthening. Nevertheless, today’s data leaves much to be desired. The PMI index fell by 0.9% in May, after it had gained 2.4% earlier; retail sales dropped to -6.0% in June. The yen still has a chance to continue growth, but investors doubt that the Japanese government will sit back and watch the currency strengthen. So it will probably adjust to yesterday’s growth, especially today - the last trading day - when the market is not likely to risk on weekends.
Analysis prepared by:
Arkady Nagiev
Forex4you analyst
