US Dollar Index Falls to Five-Week Low
The US dollar was on the defensive Friday, as disappointing growth figures continued to weigh on the greenback leading up to the weekend.
The popular gauge of the US currency’s strength declined 0.15 percent to 80.10, a five-week low. The dollar index, which pits the greenback against six other major currencies, is on pace to decline more than 0.2 percent this week.
The greenback was on its heels all week as the forex market assessed a steady stream of US economic data. Positive home sales figures earlier in the week were overshadowed by a steeper than expected drop in first quarter GDP and a sharp decline in durable goods orders.
The US economy contracted at an annual rate of 2.9 percent in the first three months of 2014, forcing the Federal Reserve to slash its growth forecast for 2014. The central bank, which has held interest rates near zero since December 2008, forecast last week that the US economy would grow between 2.1 percent and 2.3 percent this year, down from the previous estimate of nearly 3 percent.
Top Fed officials also said long-term interest rates are likely to trend below the historical average of 4 percent, prompting speculation the central bank will be slow to raise the cost of borrowing during the recovery.
Based on the Fed’s latest projections, economists are forecasting the first rate hike to be introduced in mid-2015.
The US government had no major data to report Friday.
In a separate report the University of Michigan said consumer confidence accelerated further in June, as consumer remained optimistic first quarter sluggishness was due to inclement weather and not some other underlying trend. The final June reading of the consumer sentiment index 82.5, exceeding forecasts.
The US dollar declined sharply against the yen following a slew of Japanese economic data.
Japan’s national consumer price index increased 3.7 percent annually in May, following a 3.4 percent hike the previous month. Excluding food and energy, national consumer inflation was up 2.2 percent, the Statistics Bureau reported.
Overall household spending in May plummeted at an annual rate 8 percent, following a drop of 4.6 percent the previous month.
Japan’s unemployment rate declined from 3.6 percent to 3.5 percent in May, official data showed.
The USDJPY declined 0.34 percent to 101.38. Initial support is likely found at 101.30 and resistance at 101.91.
The EURUSD edged higher after German inflation gained traction in June. German consumer prices rose 1 percent annually in June, after falling to 0.9 percent the previous month.
The EURUSD declined 0.17 percent to 1.3635. Initial support is likely found at 1.3577 and resistance at 1.3643.
The GBPUSD remained supported above 1.70 after a slew of UK data.
The UK’s current account deficit fell from £-23.519 billion to £-18.459 billion, the Office for National Statistics confirmed today.
The ONS also confirmed UK GDP growth at 3 percent annually in the first quarter.
The GBPUSD dipped 0.08 percent to 1.7011. Initial support is likely found at 1.6985 and resistance at 1.7055.
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