5 September, 2013
The US dollar was traded downwards on Wednesday against most major currencies (except the yen) after 5-day growth in a row according to the dollar index amid weak statistic on trade balance and manufacturing PMI in the region of New York. Most of all commodity currencies grew against the dollar. According to the US Department of Commerce US trade balance deficit grew by 13.3% in July – to $39.1 billion having exceeded the expectations. Deficit growth in July was the most significant since January 2011.
Trade Balance of the USA and Canada
The exports dropped in July by 0.6%, while the imports rose by 1.6% mainly due to the oil and automobile imports increase. ISM New York Index dropped to 60.5 in August against 67.8 prior month. IBD/TIPP Economic Optimism grew to 46 in September from 45.1 in August, which met the forecasts. FOMC Member John Williams making speech on Wednesday said that despite bond purchase tapering off, the policy would be still very mild.
The Australian dollar showed the highest growth Vs the dollar among all currencies after the GDP data for the second quarter that turned out a little better than expected. Australian GDP in the second quarter rose by 0.6% compared with the prior quarter, which exceeded the expected growth by 0.5%. At an annual rate the economy has risen by 2.6% Vs Consensus 2.5%. Consumer spending grew by 0.4% last quarter, saving rate increased to 10.8% from 10.5%. The AUD was also supported by Chinese Services PMI growth - HSBC Services PMI reached 5-month high in August and rose to 52.8 against 51.3 in July.
Quarterly GDP growth of Australia and the USA
The Canadian dollar rose amid the Bank of Canada meeting finished on Wednesday where the key interest rate was left unchanged and it was repeated that the current monetary policy was still appropriate as there were no any expected changes of demand from the exports and investment yet. GDP growth met the forecast of the Bank of Canada, inflation was still moderate and the exports and investment should grow. The CAD ignored trade balance deficit growth data of Canada in July that rose to 0.93 billion Canadian dollars against 0.46 billion prior month.
The pound reached almost 2-week high Vs the dollar after the release of Services PMI which grew to the highest readings since December, 2006. Services PMI rose to 60.5 in August from 60.2 while it was expected to fall. Service sector accounts for 75% of all the UK economy. The index has been growing for eight months in a row. August growth was mainly due to new orders increase. The data justifies the strengthening of British economic recovery rates in the third quarter.
The euro rose after the publication of revised GDP for the second quarter despite Services PMI and retail sales data that fell short of expectations. Euro-Zone Revised GDP coincided with the preliminary estimate +0.3% - but an annual rate GDP fell slightly less that the initial estimates: by 0.5% not 0.7%. Retail sales rose only by 0.1% m/m in July against the forecast of +0.4%. The Final Services PMI in the euro-zone was lowered to 50.7 against the preliminary estimate of 51 – however, the index is still at 2-year high.
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The US dollar was traded downwards on Tuesday Vs most major currencies before the FOMC meeting next week where a decision on QE tapering may be made but anyway it will be probably small, which is unlikely to support the dollar...
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