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Video for August 22nd, 2008 (5 min): Greenback Takes Advantage of Weak UK and Euro-zone Data, Plus Bernanke Comments to End Week on Positive Note EUR Currnet Account Widens in July Overnight, data from the Euro-zone showed the current account deficit widening to 8.3 billion euros. This was a much larger deficit than forecast. EUR Annual Industrial New Orders Falls to 6-Year Low Industrial new orders fell 0.3% on the month in June, a better result than May and better than forecasts. However, looking at the annual figure, orders are now down 7.4% on the year, the largest fall in 6 years. A decline in orders for transportation equipment such as planes and rail cars was a main factor. EUR/USD - Euro Gives Up Part of Yesterday's Gains On Weak Data, Dollar Strength
The Euro-Dollar pair fell in favor of the greenback overnight after hitting a high near 1.49 to start the global session. In NY trading, the pair was mainly consolidating around 1.48 and will end the week about 100 pips higher than it started. The Dollar rally seen throughout late July and most of August came to a halt as oil prices rebounded and credit-market woes came back into play. UK GDP Stagnates in 2nd Quarter, Revised Version Lower Than Forecasts In the UK, economic growth for the second quarter was weaker than first estimated. The revised version of GDP came in at a flat 0%, compared to the preliminary estimate of 0.2%. That ends the longest stretch of economic growth in more than a century. The GDP grew 1.4% from a year ago, the weakest growth since 1992. UK Index of Services Weaker Than Expected An index of UK services also came in lower than expected, posting a 0.2% increase for the 3 months through June. GBP/USD - Pound Slides 250 Pips After GDP Data
The Pound was hammered following the GDP data. The Pound-Dollar pair slid as much as 250 pips from its level prior to the release, to test 1.8510. That was a low for the week, breaking below short term support at 1.8550. EUR/GBP - Euro Jumps Vs Pound After UK GDP Data
The Euro-Pound pair jumped 50 pips, continuing this week's trend for the pair. It now tests resistance near 0.7990, which was the point where the pair stalled last week. Though both economies are struggling, the ECB has the better chance of holding rates steady, as the Bank of England may be forced to move lower on rates to combat its current weakness. USD/JPY - Dollar Rebounds vs Yen as Bernanke Soothes Wall Street
The Dollar-Yen pair rebounded strongly from yesterday's fall, wiping out all of its gains to return to Wednesday's level. The pair rallied from support near 108.30, and was bolstered further during NY trading as Bernanke gave a dovish speech. He said recent developments in commodity prices and the dollar, along with slower growth should lead to a cooling of inflation. That means the Fed does not have to raise rates as fast if inflation continued to be on the rise. His comments helped to cap off the 150 pip rally. Stocks in the US were also boosted by news that there was interest in a Korean Development Bank buying out Lehman Bros. Next Week Next week will be busy for fundamental releases as the month draws to a close. The first half of the week will include consumer confidence, business confidence and GDP data from Germany, along with housing sales and prices data from the US. |
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