The U.S. dollar traded in a mixed direction overnight as the greenback appears to be settling into new, higher ranges against its higher-yielding counterparts. Indeed, the dollar rose against the Euro despite European equities rallying in early trading. Market participants will likely focus on a slew of data released this morning in the U.S. to dictate general market sentiment and thus the direction of the U.S. dollar. The U.S. economy grew at a 1.9% pace in the first quarter, marking the start of what Federal Reserve policy makers project is a temporary slowdown in growth. The revised GDP numbers matches the median forecast of economists and follows a 3.1% gain in the prior quarter. A separate report showed orders for durable goods climbed more than forecast in May after slumping the prior month, easing concern manufacturing will share in an extended U.S. growth slowdown. Bookings for equipment meant to last at least three years rose 1.9% after a 2.7% declined the prior month, according to the Commerce Department. The U.S. dollar has shown little reaction to the data in early trading.
The Euro fell modestly against the U.S. dollar amid speculation a European Union pledge to stabilize the region’s economy won’t resolve a sovereign-debt crisis. Late yesterday, EU leaders vowed to stave off a Greek default as long as Prime Minister George Papandreou pushes through a package of austerity measures next week. European Central Bank Executive Board member Jose Manual Gonzalez-Paramo said the end of the crisis won’t happen soon. Failure to secure aid would push Greece to the brink of default, with the country needing funds to cover 6.6 billion euros of maturing bonds in August. The Euro retraced some of its losses following a report that showed the Ifo index of German business confidence unexpectedly increased. The survey of 7,000 executives for June increased to 114.5 from 114.2 in May.
The Japanese yen continues to hold its tight range from the last month versus the U.S. dollar. We expect the yen to continue to act like Duran Duran and stay stuck in the 80s of the coming weeks.
The British pound held a tight range against the U.S. dollar overnight despite a modest rise in risk sentiment. The pound is headed for a fourth weekly decline against the dollar amid speculation that the Bank of England will keep monetary policy loose to counter faltering growth. Minutes released from the British central bank’s last meeting, released this week, showed officials voted 7-2 to hold interest rates at a record low. Some officials foresaw more bond purchase. As the Bank of England becomes increasingly dovish, the pound will likely remain soft for the duration of the summer.
