Initially in the week, the US Dollar traded in a tight range against most of its major counterparts, as the market lacked any direction.
However, the US Dollar started to drop as data from the US economy disappointed investors and fuelled expectations that rates will stay at their current low level despite recent comments from a monetary authority suggesting otherwise.
The US Dollar index closed the week lower at 80.04 as a downward revised GDP figure combined with a drop in durable goods orders disappointed the market.
In the euro zone, preliminary data on Friday showed that German consumer price inflation rose in May. The release pushed the Euro higher against the greenback as it relieved deflation concerns in the market. The Euro reached a high of 1.3652 and closed the week at 1.3650.
The pound was almost unchanged against the US Dollar on Friday, trading close to five-year highs after UK first-quarter economic growth data came out in line with expectations. Cable reached a high of 1.7051, its highest since June 20, and consolidated subsequently to 1.7033. The pair closed the week at 1.7036.
The Japanese Yen gained against the US Dollar on Friday on fresh expectations for the Federal Reserve to keep monetary policy loose despite recent comments from a monetary authority suggesting otherwise as disappointing US economic data painted a different picture. In Japan, consumer inflation rose at a 2.8% annual rate, indicating that efforts from the Bank of Japan are continuing to promote inflation and growth in the country. USDJPY opened the week at 102.07; the Yen then gained gradually and closed the week at 101.41.
US durable goods unexpectedly fall in May
Orders for US manufactured goods unexpectedly fell in May, suggesting an anticipated rebound in growth this quarter could fall short of expectations. The Commerce Department stated last week that durable goods orders declined one percent as demand for transportation, machinery, computers and electronic products, electrical equipment, appliances and components, and defence capital goods fell.
US GDP’s biggest drop in
five years
The US economy contracted in the first quarter by the most since the depths of the last recession as consumer spending receded. Gross domestic product fell at a 2.9 percent annualised rate, more than forecast and the worst reading since the same three months in 2009, after a previously reported 1 percent drop. It marked the biggest downward revision from the second GDP estimate since records began in 1976, owed primarily to a slowdown in health care spending.
Unemployment claims lower
Fewer Americans filed applications for unemployment benefits last week, a sign of steady progress in the labour market. Jobless claims fell by 2,000 to a one-month low of 312,000 in the week ended June 21. The median forecast of economists surveyed by Bloomberg called for 310,000 initial claims. Dismissals are hovering just above their pre-recession lows and hiring has picked up, as companies grow confident that the economy will snap back from the worst contraction in five years.
Consumer spending disappoints
US consumer spending rose less than expected in May, likely held back by weak healthcare spending, which could prompt economists to temper their second-quarter growth estimates. The Commerce Department said last week that consumer spending increased by 0.2 percent after being flat in April. Spending, which accounts for more than two-thirds of US economic activity, was expected to rise 0.4 percent after a previously reported 0.1 percent dip in April.
Europe & UK
German CPI Higher
Preliminary data on Friday showed that German consumer price inflation rose 0.3 percent this month, more than the expected 0.2 percent gain, after a 0.1 percent fall in May. The data dispelled concerns that the Euro zone may slip into deflation. The Euro gained against the greenback and euro-area government bonds declined, following the announcement.
UK: GDP expanding, current account narrowing
The Office for National Statistics said last week that the UK’s gross domestic product expanded by 0.8 percent in the first quarter, in line with market expectations. A separate report showed that the UK current account deficit narrowed to £18.5bn in the three months to April, from £23.5bn in the fourth quarter of 2013 whose figure was revised down from a previously estimated deficit of £22.4bn. Analysts had expected the current account deficit to narrow to £17.5bn in the first quarter.
Japan
Japan prices rise most in 32 years, retail sales drop lower than expected
Japan’s consumer prices climbed at the fastest pace in 32 years, swelled by a sales-tax increase and higher utility charges that are squeezing household budgets as wage gains remain limited. Consumer prices excluding fresh food rose 3.4 percent in May from a year earlier. Accelerating inflation is a boost for the Bank of Japan as it targets 2 percent price gains, a goal that strips out the impact of April’s 3-percentage point tax rise. In addition, a government report showed that Japan retail sales fell 0.4 percent in May compared with a year earlier, less than the expected 1.8 percent decline and after a 4.4 percent drop in April.
