Last Week’s Currency Trading Review:
The EUR/USD edged up on Friday to trade at 1.3410 as markets went a bit haywire. The euro was weak most of the previous week. The ECB decision on Thursday was as expected but Draghi’s comments were rather dovish and said the Eurozone recovery was fragile and could be hurt by Russia sanctions.
US data continued to print all week on the positive side. Factory orders were stronger than expected at +1.1% m/m in June (consensus was looking for a 0.5% m/m number) driven by a +1.7% m/m increase in durable goods orders, which make up roughly 45% of all orders. Non-durable goods orders were up by 0.6% m/m. July brought a decent increase in the ISM non-manufacturing index which rose to 58.7 in July vs. 56 in June.
The AUD/USDadded 3 points to end the week at 0.9277 after Chinese trade data upset the markets with the trade balance widening as exports soared but imports tumbled. The Aussie was hammered by an unexpected jump in the domestic jobless rate, was down 0.9 per cent to 0.9268 It fell to $0.9263 at one point, its lowest level since early June. The Reserve Bank of Australia kept its cash rate at a record low of 2.5 per cent on Wednesday, but the jobs numbers underlined continuing worries over the economy’s growth prospects after the end of a mining investment boom.
China’s consumer price inflation remained within the government’s comfort zone in July, giving room for the central bank to ease monetary policy further in favor of economic growth. Traders are still trying to understand the huge drop in imports to China as reported Friday in the trade balance. Exports soared while imports tanked.
The USD/JPY climbed as the stronger US dollar pushed the currencypair to 102.69at the end of the week. The Japanese yen (JPY) retains a weak tone against the USD, yet it has gained value versus the EUR. Japanese economic activity will continue to suffer the negative impact from an increase in the consumption tax.