Forex Daily Wrap Up: USD gives back gains on revised GDP data

on Jun 26, 2013


The pair has continued to fall today, pressured downwards by yesterday’s positive US economic data. The USD has climbed against the euro, pushing the pair to a three-week low at 1.3013.
Even with the disappointing US GDP revision, which has been released early in American session today, the euro hasn’t been able to advance enough to return to yesterday’s highs.

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According to the US Bureau of Economic Analysis, annualized GDP growth for Q1 of 2013 was revised down to 1.8 percent from the previously estimated 2.4 percent. And inflation as measured by the Personal Consumption Expenditures index rose by one percent in the first quarter of 2013 q/q. The Core reading, excluding food and energy costs, rose 1.3 percent q/q. Both numbers matched expectations.

These negative readings have brought back doubts that the Fed will go through with its intention to taper its $85 billion monthly asset buying as early as September this year.
The dollar index, which tracks the performance of the USD versus a basket of six other major currencies has climbed by 0.19 percent to 2.94 points today.
Finance ministers from the European Union have met in Brussels today to discuss Europe’s banking union plans. During the meeting, the European Central Bank President Mario Draghi said the overall economic outlook for the euro zone still warrants accommodative monetary policy and called for the Eurozone political leaders to implement economic reforms in order to spur growth.

Thursday will see a new wave of updates with the European Council meeting taking place.
The German Import Price Index will be updated at 07:00 BST, followed by the German unemployment data, Eurozone M3 money supply and private loans at 09:00 BST.
The list continues with Eurozone economic and service sentiment, business climate, consumer and industrial confidence at 10:00 BST.

In USA, the weekly jobless claims data, personal spending and income updates and Personal Consumption Expenditure Index will appear at 13:30 BST, followed by weekly pending home sales and EIA Natural Gas Storage Change between 15:00 and 15:30 BST.
The US updates will be closed with FOMC member Jerome H. Powell’s speech at 15:30 BST.

Earlier today at the close of the Asian session the yen had strengthened against the dollar on falls in Japanese equities, provoked by growing fears of a credit crunch in China, despite fears being eased throughout today as interbank interest rates declined for a fourth consecutive day and with money market rates also falling.
The People’s Bank has assured that measures will be implemented to ensure short-term liquidity and stable markets.
The Nikkei stock index fell by more than one percent today.
In Japan’s fundamental news today, the Corporate Services Price Index for May was announced at an annualised rise of 0.3 percent to 96.3, following a -0.3 reading in April.
Following the latest US GDP update, the yen took advantage of the blow to the US dollar and the pair fell to a new daily low at 97.26.
The pair has traded lower today, the GBP undermined by the increased demand for the dollar, hitting a three-week low at 1.5349 early in the American session, while waiting for the US releases.
Later, following the revised US first quarter GDP, the pair rose to 1.5396, but not for long. The quote sunk to new low at 1.5335 in continuing trade with more bearish signals.
Today, the financial stability report of the Bank of England warned the risk of sharp rises in interest rates is still a threat for UK’s economy.
According to the BoE report, market sentiment has improved, as has bank funding and credit conditions, in contrast to the situation in the Eurozone.
Tomorrow, the Bank of England is due to release its credit conditions survey for Q2 of 2013 so far, followed by UK’s current account, GDP and total business investment for Q1.
Despite the recent negative US GDP updates, the pair has continued to rise during the early American session, with the USD supported yesterday by strong economic data on consumer sentiment, housing price and new home sales data.
The major indicator of private consumption trends, which is the most important component of Swiss GDP was updated at 07:00 BST today. According to this release, the Swiss UBS Consumption Indicator remained unchanged at 1.46 for May, a statistic which did little to provide support for the Swiss currency.
In continuing American trade, following the disappointing data, the pair has risen to near three-week highs at 0.9438. The bullish trend looks set to hold for some time.
The pair has traded higher today, compared with yesterday’s lower levels, rising to near the weekly high quote at 0.9345.
The Australian dollar is still under the strong influence of jittery Chinese news, threatening economic growth in Q2. Demand for the US dollar has been supported by yesterday’s updates, before the revised GDP data published today has taken some steam out of the USD’s strength.
Following the lowered economic growth in US, the pair has started to fall from highs, hitting 0.9286 so far in the American trading session.
The Canadian dollar has traded lower today, falling from more than two-year highs at 1.0548, reached after its USD counterpart was supported by strong US economic data yesterday.
Lacking Canadian updates, the pair has been under the influence of the most recent comments by Fed officials.
However, the weak revised US GDP numbers have brought back previous doubts that the Federal Reserve Bank will start tapering the $85 billion monthly asset buying.
Following the lowered economic growth in US, the Canadian dollar has tried to take advantage, rising from a daily low at 1.0457 to 1.0486.


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