Forex Daily Wrap Up: UK’s GDP rises 1.4% in Q2

Written by: Violina Todorova
July 25, 2013 Thursday July 25th:_

The euro started an upward trajectory against the greenback in early Asian trading today, with the pair hitting an intraday high at 1.3237, but the momentum wasn’t sustained and the price then retraced to a two-day low at 1.3164, decreasing 73 pips, in early European trading.
The ECB today reported that the Eurozone’s M3 money supply was down 2.8 percent in the three months to June, after 2.9 percent from the prior period. On an annual basis, funds in circulation shrank 2.3 percent in June, below expectations for a three percent rise and down from May’s 2.9 percent.

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The German IFO – Business Climate Index was reported as a rise to 106.2 in July from June’s 105.9 The IFO – Current Assessment Index came out up at 110.1, versus June’s 109.4 and above forecasts for 110.0. IFO – Expectations fell slightly to 102.4 from the prior 102.5 and against expectations for no change.
The USD remained under selling pressure following the release of the mainly positive US Durable Goods Orders data for June and insipid initial jobless claims data for last week.

Orders for US durable goods rose 4.2 percent in June, well above expectations for a 1.4 percent advance though short of May’s revised 5.2 percent. Airplane-making, up over 30 percent m/m, was a major contributor to the rise.
Excluding the traditionally volatile planes, trains and automobiles, the numbers were flat in June, better than the expected 0.5 percent fall from May’s one percent.

Initial Jobless Claims for the week ended July 19 came out as a rise of 7,000 to 343,000, worse than expectations for 340,000 and up from the prior week’s 336,000, leaving little for QE-tapering advocates to cheer about.
Since the pair recorded its so far intraday high at 1.5384, in early European trading, sterling has fallen sharply to its lowest exchange rate for the day against the greenback at 1.5261, decreasing 123 pips to this point, and this despite encouraging signs of economic growth in the UK.

The preliminary reading of the UK’s GDP for Q2 on a quarterly basis came out as a rise of 0.6 percent after a 0.3 percent expansion in the first quarter of the year, adding to the picture of a recovery that is gathering pace.
The year-on-year preliminary reading for the second quarter checked in as an increase of 1.4 percent, in line with analysts’ expectations and up from 0.3 percent in the prior quarter.
The growth was boosted by stronger performances in the agriculture, production, construction and services sectors during the second quarter.
The UK’s Services Index came out as 0.8 percent growth in the three months to May, after rising 0.2 percent in the April quarter. Analysts had been expecting a 0.2 percent increase.
The Asian session saw the USD/JPY at 100.38, starting a downtick which has continued through the European and into the American sessions, with the pair falling to what remains an intraday low at 99.52, to be down 86 pips so far.
The yen’s rise against the greenback appears to have been stimulated by a fall in Asian and European equities, boosting demand for safe-haven currencies.
Simon Smith, chief economist at FxPro Group Ltd in London, observed: “Japanese stocks have fallen for the last couple of sessions and that’s giving the yen some support. We’re seeing a tighter correlation between Japanese stocks and the yen. It’s going to be a slower grind for the yen to weaken.”
Japan’s Foreign Bond Investment data for last week was released early in today’s Asian session, showing that resident investors bought ¥549.3 billion of foreign bonds during the week, as against the prior week’s ¥1.1056 trillion – the largest outlay since September 2012.
Foreign investors bought ¥349.8 billion of Japanese stocks last week, down on the prior week’s ¥398.2 billion.
The greenback started on something of a rally against its Canadian counterpart in the Asian session today, with the pair rising to 1.0316, still an intraday high. So far in American trading the price has eased 42 pips to what remains the day’s low at 1.0274.
With a lack of Canadian economic updates today, the loonie found support in the fixing of September-delivery crude futures at $105.39 in New York trading today. Crude oil is Canada’s single largest export product and a key factor in its trade with the US.
The AUD/USD opened today’s Asian session slightly below any time in the past six days at 0.9130 but at this mid-point in New York trading the aussie has firmed against the greenback, with the quote rising to a high to this point in the day at 0.9129.
Yesterday the pair hit a two-week high at 0.9315 on the Asian opening but the AUD faltered later in the day, when the Australian Consumer Price Index came out below expectations and HSBC’s China Manufacturing PMI fronted this month as an 11-month low. It was all too much for the aussie and the AUD/USD descended to a six-day low at 0.9127.
In early European trading today the greenback rose to what remains an intraday high at 1.5384, but ahead of the New York opening the pair fell emphatically to a three-day low at 1.5261.
The pair’s movements appear to have been influenced mainly by the June readings for the US Durable Goods Orders, and ditto excluding Transportation, released earlier in the day.