The US dollar is little changed from yesterday’s levels, gaining modestly against the higher-yielding NZD, AUD, and CAD. The dollar also posted a 0.58% corrective move against the Japanese yen after yesterday’s fall to a 15-year low.
On the data end, US durable goods orders rose a mere 0.3% vs. the forecasted 3.0% and previous -1.0%. The data highlighted the slowing manufacturing sector and deteriorating consumer demands. Coupled with yesterday’s disappointing home sales releases, the outlook for economic growth remains grim. However with its safe-haven status, the dollar is supported in the short run by increased risk aversion flows.
The euro edged higher against the dollar, gaining a modest 0.37% as it was lifted by better than expected German IFO data. Earlier in today’s trading session, the euro traded at the high of 1.2727 after IFO survey of business sentiment beat forecasts, suggesting that the German economy is on its way to recovery. The data posted a 106.7 gain vs. the forecasted 105.7 and previous 106.2. Nonetheless, the euro fell back to 1.26 levels as risk aversion flowed back into the market on disappointing US durable goods data. Should the euro continue to be supported above 1.2600 and override risk aversion flows, investors may see the euro rally further.
The British pound reversed some of yesterday’s losses against the greenback as it found technical support near the 50-day moving average at 1.5368. With risk aversion currently driving the market and little economic releases from the region, investors may see the cable weaken further until Friday’s GDP release.
The Canadian dollar fell for a fifth consecutive day against the greenback as softer US economic data drove risk aversion higher and equities lower. With the US and Canadian economies closely linked, weaker US durable goods data as well as yesterday’s disappointing Canadian retail sales data has put increasing pressure on the loonie. With increasing global economic uncertainty, the outlook on whether the BoC will increase interest rates at the September 8’s meeting remain relatively mixed – with the market pricing in a 30% probability of an interest rate hike.
The Japanese yen retreated from yesterday’s 15-year high against the dollar on speculation that Japanese officials will finally take steps to end further gains in that the yen may impede the nation’s recovery. Japanese Finance Minister Yoshihiko Noda pledged for “appropriate action” to be taken. Furthermore, the Nikkei newspaper stated that Bank of Japan will consider further monetary easing.
The Australian and New Zealand dollars continued to be pressured as risk aversion drove the equity and commodity markets lower. Furthermore, a report showed the world’s largest economy expanded less than previously estimated in the second quarter, heightening concerns that global growth is slowing.
Conversely, the South Pacific currencies recovered against the Japanese yen after Japanese Finance Minister Noda’s comments suggest that policy makers may consider intervening in the currency markets.
