Forex: Afternoon update: US dollar shook after negative data

on Aug 26, 2013
Listen August Monday 26th_:

Greece will issue bonds in the second half of 2014, announced the Greek finance minister Stornaras in an interview with German newspaper “Handelsblatt”, published today. The minister was optimistic that the current yield on 10-year government bonds, which is about 10 percent, will be reduced. The Minister confirmed that Greece will have a deficit of 10 billion euros in 2014-2015, but stressed that new debt relief will not be necessary.

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The governor of the Bundesbank Jens Weidmann today again criticized the program of the European Central Bank (ECB) to open cash transactions (OCT). He stressed that the central bank would have contributed most to the crisis, if the ECB concentrates on its commitment to ensure price stability. Weidmann urged that governments do not to rely on the ECB to solve their problems, stating that it would be best the central bank stick to its core competence. He also called for a limit on holdings of government bonds and to dedicate sufficient capital reserves in order to break the link between states and banks.

Orders for US durable goods fell significantly in July as demand for aircraft has declined, while business investment remained weak. Total orders for durable goods were down by 7.3 percent to $226.3 billion in July, while the average forecast was for a decline of 4.0 percent. The decrease was mainly supported by weaker orders in the field of civil aviation, which fell by 52.3 percent m/m. The Core Durable Goods Orders were also at low levels, decreasing by 0.6 percent in July. However, the data on an annual basis, showed that orders were up by 3.3 percent, while the core orders rose by 2.5 percent. The dollar fell sharply after the release of the data and the EUR/USD rose by 0.2 percent to 1.3393. At press time the pair is trading at 1.3377.

A survey of 220 economists, conducted by the National Association for Business Economics (NABE), generally dismissed the likelihood the US central bank will start lowering the stimulus in September this year, while expecting that the country’s deficit over the next two decades would become an economic challenge. Most of the respondents think that the current Fed policy is adequate.

Politicians from the Fed rejected international calls to recognize the threat of turmoil in emerging markets by lowering the rate of stimulus in the largest economy in the world. Risks of any reduction in existing stimulus by the central bank of the US for developing economies was the main topic at the annual meeting of bankers and economists in Jackson Hole, Wyoming ended August 24. If the FED starts withdrawing stimulus for the economy, it would undermine the economies of the countries from India to Turkey, because it will lead to a mass migration of funds and higher interest rates on loans.
The UK banks are closed today due to Summer Bank Holiday and no economic reports are to be released.
So far today the GBP/USD has been trading within a 56-pip range from 1.5555 to 1.5611 and at the moment is resident at 1.5575, close to the opening level.
Japan’s Corporate Services Price Index (CSPI) y/y today showed a 0.4 percent increase in July, matching expectations and repeating the prior period’s rise.
The Nikkei 225 index today closed at 13,636.28, a 0.18 percent loss.
There were no economic reports from Australia today, and none are scheduled to be released till Wednesday, when the report on the Q2 Construction Work Done q/q is to come out.
Right now the AUD/USD is staying at 0.9050, 0.24 percent above the opening level.
The economic calendar is not offering any reports from Canada today. Tomorrow the Q2 Corporate Profits q/q report is expected.
At press time the pair is changing hands at 1.0515, still above the 1.0500 psychological level.
Switzerland is not offering any scheduled economic releases today.
The pair is at the moment trading at 0.9230, 0.21 percent above the opening price level.
Yesterday the Statistics of New Zealand released the country’s Trade Balance, showing a NZD774 million deficit in July, disappointing the expectations for a NZD50 million surplus. The exports were NZD3.85 billion, while the imports were NZD4.62 billion.


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