Risk aversion surged yesterday, fueling the Japanese Yen to appreciate against its major currency counterparts. The Dollar tumbled from the highest level in almost two weeks against the Yen as orders for U.S. durable goods unexpectedly dropped last month and the Federal Reserve reported slowing economic growth in some areas. Global Risk appetite stalled yesterday as Orders for Durable goods in U.S. sank in June – adding to the long chain of disappointing U.S reports. The U.S Census bureau stated that Durable Goods Orders fell by 1.0% on weaker demand for airplanes, electronics, and machinery, steel and other long-lasting manufactured products. Excluding transportation, the Core rate fell by a seasonally adjusted 0.6% in June, after a revised upward reading of 1.6% in May. The market had expected core durable goods to rise by 0.6%. Meanwhile, the Fed emphasized in its Beige Book reading, that while the economic recovery is moving forwards, it is progressing at a slower pace than it had earlier this year.
Down in New Zealand, the RBNZ raised the key interest rates by 0.25bps, to 3.0% as expected. However, the New Zealand Dollar, nicknamed the Kiwi, fell for a third consecutive day, as the central bank said weakening growth prospects will slow the pace of future interest-rate hikes.
Today’s focus will be the U.S weekly Unemployment Claims. The market predicts a slight drop to 457K claims, down from last’s week 464K, which may help to ease concerns over the recent downward turn in US economic data. However, tomorrow’s U.S GDP report will be the key indicator to watch. Analysts predict that the U.S economy grew at a slower pace in the second quarter as consumer spending fell and the trade deficit expanded. After a strong end to 2009 (growth of 5.6%), the first quarter’s GDP rose by a smaller 2.7%, which fueled speculations of a double dip recession. Tomorrow, the U.S will release its Advanced GDP for the second quarter is expected to show another smaller increase of 2.5%.
The Euro edged up against the Dollar this morning, erasing the previous day’s losses, just hours ahead of Germany’s unemployment data release. The 16-nation common currency extended its gains against the dollar, rising 0.3% to strike a new daily high of $1.3034. Currently the EUR/USD continues to be on the verge of hitting a new 11-week high, if the pair can breach the $1.3046 mark. At the moment, the pair is trading around 1.3040, 0.31% higher than yesterday’s closing price.
Shortly, Germany will release its unemployment change, which expected to show a drop of another drop of around 18K.
U.K. house prices dropped in July for the first time in five months as stricter lending conditions and increased concerns that the new government cuts will slow economic growth frightened potential home buyers. According to this morning’s report the average cost a home fell 0.5% percent June, while the analysts had expected a smaller drop of 0.2%. Following the release, the Pound was up against the Dollar, with the pair rising 0.26% to hit 1.5639
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