Forex: Afternoon update: US dollar weakened by speculation

on Aug 20, 2013
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The Producer Price Index in Germany fell in July diverging from economists’ forecast for growth. On an annual basis, the index rose by 0.5 percent after rising by 0.6 percent during the previous month. Economists had expected the index to rise by 0.7 percent. The slowdown mainly reflected the decline in the prices of the products used in the manufacturing process, which declined by one percent compared to July 2012. Influenced by general inflation, consumer goods with short-term use have increased by 2.9 percent y/y. Energy prices have risen by half a percent, while the means of production – by 0.7 percent.

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The US dollar today fell sharply on speculation before Wednesday’s publication of the last meeting of the FOMC. Pressure on the dollar came amid uncertainty over the timing of a possible shrinking of incentives that the US Federal Reserve poured into the economy. The dollar index fell by 0.3 percent to 81,015 points, while the EUR/USD rose by 0.4 percent to 1.3385.

Currently the pair is trading at 1.3430.
The US Redbook Index m/m rose by 0.2 percent during the past week.
The Council of Mortgage Lenders today stated that UK gross mortgage lending is at its highest level since October 2008.
The economic calendar doesn’t offer any scheduled reports from the UK today.
Japan’s All Industries Activity (change in the total value of goods and services purchased by businesses) m/m report came out today, showing a 0.6 percent decrease in June, matching expectations.

The Nikkei 225 index today closed at 13,396.38, a 2.63 percent loss.
The last meeting minutes of the Reserve Bank of Australia report today stated that the movement of the currency is crucial in setting monetary policy and stands ready to further reductions in interest rates. The RBA decided to cut the benchmark interest rate by 0.25 percent to a record low 2.50 percent at its meeting on 6 August. The AUD/USD fell by 0.8 percent after the announcement of the record, reaching 0.9043.

On Friday the copper prices on the London Metal Exchange decreased by 0.7 percent to $7285.5/MT and the aluminium prices dropped by 0.2 percent to $1872.5/MT.
The Canadian Wholesale Sales m/m report today showed a 2.8 percent decline, compared to the expected 0.5 percent fall and the prior 2.2 percent rise.
So far today the pair has been trading within a 58-pip range and at the moment is changing hands at 1.0387. The 1.0400 psychological level was tested a couple of hours ago, but provided resistance.
There are no economic reports scheduled to be released today, neither tomorrow and the USD/CHF will be driven mostly by the US releases.
Today the pair has been moving within the range 0.9250 to 0.9146 and right now is trading at 0.9175, below the strong psychological 0.9200 level.
The Q2 Inflation Expectations q/q report today was released from the Reserve Bank of New Zealand, showing that business managers are expecting the price of goods and services to increase annually during the next 2 years by 2.4 percent. The prior expectation was for a 2.1 percent change.
At press time the NZD/USD is residing at 0.7981, beneath the psychological 0.8000 level.


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