US Dollar falls on peers after Durable Goods Orders disappoint in December

Enrique Díaz-Álvarez28/Jan/2015Currency Updates

GBP

Despite a fall in growth in the last quarter of last year, a strong day’s trading for the Pound saw the UK currency appreciate by 0.75% against the US Dollar.

With just under a hundred days to go until elections begin in the UK there are signs of a slight slowdown in the British economy. Economic expansion in the fourth quarter of last year slowed more than forecast, from 0.7% in Q3 to just 0.5% in the final three months of the year. A 0.8% increase in the services sector was offset somewhat by construction and manufacturing output shrinking by 1.8% and 0.1% respectively. Yet despite this, overall growth for 2014 of 2.6% is the fastest of any major world economy, and also marked the strongest yearly growth in the country since 2007. Given risks in the global outlook, the IMF recently lowered UK growth expectations to 2.4% for 2015.

A lack of data in the UK on Wednesday means the Pound will be mostly driven by external factors in Europe and the US.

EUR

Tuesday was an unusually quiet day in Europe as far as announcements were concerned. The single currency did, however, regain some ground against its major peers, up by 0.75% versus the Dollar, although still well down on last week’s pre-ECB announcement levels.

There were no major data releases in the Euro-area yesterday, although the Euro did stabilise significantly having taken a beating of late. Greece was once again in the spotlight as members of Alexis Tsipras’ new Greek cabinet were sworn in less than a day after the Prime Minister. Greek bank shares were down substantially as investors fear a lengthy clash between the EU and Greek government over the country’s proposed debt write-off.

A handful of second-tier announcements in the Euro-area this morning will all take place before London markets open, and so market volatility should be mostly subdued.

USD

The greenback declined for the second consecutive day this week against its major peers after a series of mixed data releases. The US Dollar index ended trading 0.75% down.

Tuesday’s main announcement across the pond showed orders for durable goods fell in the US economy in December. A strengthening Dollar, increasing oil prices and a slowdown in Europe were all cited as reasons for a decline in the Durable Goods Orders measure, which was down by 3.4% last month. The US Census Bureau measure excluding transportation was also amiss, coming in below forecasts at -0.8%. In contrast, US consumers were far more upbeat about the economy at the start of this year according to the Conference Board. The measure of Consumer Confidence soared to 102.9 this month, well above the 95.1 reading that was expected, and in the process reached its highest level since way back in August 2007.

In a hectic afternoon of releases, Markit’s flash PMI showed a modest rebound in the service sector in January, with the index climbing to 54.0. This in turn boosted the Composite index to 54.2. Elsewhere, sales of new homes rose impressively by 11.6%, although this is a volatile number and thus the market impact was muted. Attention in US trading today will be firmly centred on the Federal Reserve monetary policy statement at 7pm UK time, with the central bank last month emphasising the need to be “patient” over the next rate hike.

Rest of the world

The National Bank of Hungary maintained its borrowing rate at an all-time low of 2.1% for the sixth consecutive month yesterday. Faced by low inflation, the central bank said the economy is moving closer to resuming monetary easing after the ECB announced the launch of its quantitative easing measures.

Print

Written by Enrique Díaz-Álvarez

Chief Risk Officer at Ebury. Committed to mitigating FX risk through tailored strategies, detailed market insight, and FXFC forecasting for Bloomberg.