US Durable Goods Orders Fell Unexpectedly

August 27, 2013

Trading at Forex on Monday was calm amid almost empty calendar and lack of any significant events on most major currencies. The dollar fell a little after the release of a weak Durable Goods Orders report but then recovered its losses. Durable Goods Orders in the USA slumped unexpectedly in July by 7.3% compared with the prior month to $226.6 bln while a drop only by 3.6% was expected.

The decrease was mainly due to the fall of aircraft orders. Durable Goods Orders Ex Transportation dropped by 0.6% against the expected growth by 0.5%. Capital Goods Orders Non-Defense Ex Aircrafts – a key indicator of business investment – decreased by 3.3% in July compared with the prior month after previous 5-month growth. At the same time a less significant Dallas Fed Manufacturing Activity Index grew up to 5.0 in August against 4.4 in July while its drop was expected.   

Jackson Hole Economic Symposium ended past weekend. This time it didn’t attract much attention as no governors of major central banks joined it. According to many experts at the summit, the desire of Fed leaders who were present at the meeting to finish asset purchasing the sooner the better was felt. The Fed seems to be still intended to reduce QE in September. Although September decrease is likely to be less than expected before – not $20 bln from current $85 bln a month but $10 bln.

The euro and the pound were traded at a narrow range and closed almost unchanged. There were no any statistics in Europe and it was a day-off in the UK. ECB board member and German Bundesbank President Jens Weidmann said on Monday that the ECB, in his opinion, wouldn’t keep interest rates at low for several years.

Weidmann again opposed buying bonds of problem euro-zone countries by the ECB having called it redistribution of risks of unsound budgetary policy to all euro-zone states. ECB President Mario Draghi announced a year ago that the ECB was prepared to buy unlimited quantities of government bonds of such countries on the secondary market – and it turned out enough to calm down financial markets.

New Zealand dollar had almost no reaction towards bad trade balance data and closed the day with a slight growth after 5-day decrease in a row. For the first time in six months trade balance has dropped below zero and has amounted to 774 million NZD. The exports grew by 4.8% at an annual rate while the imports rose by 17% - mainly due to aircraft and oil products imports increase. Standard & Poor's Ratings Services affirmed its AA long-term foreign currency rating on the country and said the rating outlook was stable.

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