Negative economic data, as well as speculation regarding further monetary easing by the Federal Reserve, pushed the USD to its lowest level since April. Markets await the release of the Non-Farm Payrolls (NFP) data due Friday for signs of the economic conditions in the US.
Economic News
USD - USD Falls on Negative Economic Data
The US dollar fell against its major counterparts after disappointing US economic data prompted speculation that the Federal Reserve could take additional monetary measures to boost the sluggish economy. The USD dropped to an 8-month low versus the Japanese yen over concerns about the economic recovery in the US, as well as to a 3-month low versus the euro.
US factory orders fell by more than expected in June from May, while pending home sales dropped an unexpected 2.6% in June, after declining 30% in May. Furthermore, a report was published by the Wall Street Journal suggesting that the Federal Reserve may prevent monetary tightening and start a bond purchasing program once again. The continuous flow of negative US economic data exacerbates concerns that the Fed will have to take monetary action soon.
Investors are keenly awaiting the Non-Farm Payrolls (NFP) data due this Friday to better gauge the pace of US economic recovery. Today traders should follow the release of the ADP Non-Farm Employment Change Estimate due at 12:15 GMT as a prelude to Friday's release, as well as the ISM Non-Manufacturing PMI at 14:00 GMT. Better than expected results may provide the greenback with a much needed boost.
EUR - British Pound Rises on Bank of England Comments
The euro rose to a 3-month high against the USD Tuesday after a slew of negative economic data dampened demand for the greenback. The EUR rose to $1.3234, up from $1.3183 late Monday; rising as far as $1.3261, the highest level since May.
The euro has been gaining strength as signs continue to mount that the economic recovery in the US is stagnating. Also, speculation has arisen that the Fed might announce further bond purchases in order to stimulate the US economy, a monetary measure which would pump more greenbacks into the market, intentionally reducing its value.
The British pound rose to $1.5946 Tuesday after former Bank of England (BOE) Deputy Governor John Gieve reassured investors about the of British economic recovery, stating that further monetary loosening may not be required.
Today, investors are advised to follow the release of the Helifax HPI at 6:00 GMT as well as any data coming from the US.
JPY - Yen at 8-Month High vs. USD
The Japanese yen rose to an 8-month high against the greenback as concern the Federal Reserve may take up additional stimulus measures to boost the sluggish US economy.
