Daily Market Update

U.S. Dollar gains on Euro as indicators fail to impress

July 31, 2018

The U.S. Dollar is trending down a bit, but remains in familiar ranges.

Overview

The eventful July may now be followed by the doldrums of August as governments head into recess and some business activity is replaced by holidays. Some data will still influence FX flow, but not much movement at the moment ahead of figures in the U.S. set for later this week.

On the European side, Euro-zone data came in close to meeting expectations, but the Gross Domestic Product and Consumer Price Index figures caused no major reaction yet. It is possible the lack of stellar performance may lead to the shared currency giving back some ground to the dollar as the day progresses. Oil prices and commodities remain relatively calm also.

 

EUR

The Euro fell a bit after the release of less than forecasted GDP numbers accompanied by higher inflation. Q2 GDP came in at just 0.3% when 0.4% was expected while CPI increased by over 1.0% at 1.1%. With European Central Bank officials already set to play the game of caution when it comes to tightening, this data helps their cause of maintaining an accommodative environment and not increase borrowing costs via interest rates anytime soon.

 

JPY

The Japanese Yen depreciated slightly after the Bank of Japan left policy unchanged. It seems like Japan sees no reason to end its loose thinking and wants no risks to further growth. In delaying any tightening, the currency is set to lose ground in the near-term.

Nevertheless, we think that a return to risk-aversion in the horizon and the recovery from recent natural disasters in the form of floods and heatwaves will spur activity within the country and thus revive the Yen.

 

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