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US Dollar Firm, Disregards Weak Data

H.S. Borji
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US Dollar Firm, Disregards Weak Data

The US dollar was steady against a basket of currencies Thursday, as investors disregarded weaker than forecast home sales and manufacturing data.

The US dollar index, a weighted average of the greenback’s performance against six commonly traded peers, climbed 0.04 percent to 80.86 after reaching an intraday high of 80.91.

The dollar index has enjoyed steady gains over the past week and a half, as investors increased bets the US Federal Reserve could begin raising interest rates sooner than previously estimated.

In economic data, US new home sales in June tumbled 8.1 percent to a seasonally adjusted annual pace of 406,000, the Commerce Department reported today. The previous month’s sales figure was revised down to 442,000.

Today’s figures reinforced concerns about the US housing recovery, which continues to be weighed down by restrictive lending conditions and slow wage growth. Average Americans saw their earnings rise just 2 percent in the 12 months through June, well below the long-run average of 3.5 percent. Subdued wage growth and rising mortgage rates could further dampen the housing recovery, as building permits and groundbreaking decline.

Separately, industry data showed the US manufacturing industry softened in July, but remained close to the previous month’s four-year peak. Markit Group’s manufacturing index declined from 57.3 to 56.3, as output and new orders rose at a slower rate while job creation fell to its lowest level in ten months.

Despite the setback, the US labour market continued to tighten in July. Initial jobless claims – a narrower measure of unemployment – declined 19,000 to 284,000 in the week ended July 19, an eight-year low.

The Commerce Department will close out the week with a report on June durable goods orders. Orders for manufactured goods meant to last three years or more are forecast to have increased 0.5 percent in June, after dropping 1 percent the previous month.

In currency news, the US dollar advanced against the Japanese yen, as the USDJPY climbed 0.26 percent to 101.79. The pair is likely supported at 101.35. The pair is likely to face resistance at 101.84.

The Japanese government will report on June consumer inflation in the Asian session.

The greenback tread water against the euro, as the EURUSD traded at 1.3467, little changed from its previous close. The pair faces initial support ta 1.3454 and resistance at 1.3475. The EURUSD is trading nearly 250 pips below the 100-day simple moving average.

The Eurozone economy accelerated at a faster pace in July, industry data revealed today. Markit Group’s composite index, which captures business conditions in the manufacturing and service industries, advanced 1.2 percentage points to 54. Economists forecast a decline of 0.1 percentage points.

The dollar continued to strengthen against the British pound, as cable fell below 1.70 for the first time in one month. The GBPUSD declined 0.38 percent to 1.6977. The pair faces initial support at 1.6941 and resistance at 1.7085.

Cable was under pressure after June retail sales accelerated at a slower rate than forecast, while core sales unexpectedly declined.

Retail sales advanced just 0.1 percent in June, the Office for National Statistics reported today. Year-on-year, retail revenues were up 3.6 percent.

Excluding fuel, retail revenues declined 0.1 percent. Year-on-year, sales in this category advanced 4 percent.

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