Forex Brokers Weak Data Emanates from Germany, Euro-zone, and UK Boosting Greenback

Daily Forex Fundamentals | Written by CMS Forex | Jul 24 08 21:41 GMT |

Weak Data Emanates from Germany, Euro-zone, and UK Boosting Greenback NZ Reserve Bank Surprisingly Cuts Benchmark Interest Rate to 8% The Reserve Bank of New Zealand surprised economists and traders yesterday afternoon and lowered rates by a quarter point, causing a quick knee-jerk reaction of Kiwi selling. Reserve Bank Governor Bollard said, with the economy weakening, and borrowing costs levied by banks rising as a result of turmoil in financial markets, the rate cut should help alleviate some of those rising costs to firms and consumers. NZD/USD - Kiwi Falters As a Result of Surprise Cut The Kiwi-US Dollar pair was already falling yesterday prior to the decision, and the surprise cut caused the quick slide in the pair. By NY trading the pair was trading near 0.74, a 200 pip slide from Wednesday's session open. JPN Trade Shows Exports Declining, Surplus at Scant 140 Billion Yen The Japanese trade surplus shrank to 140 billion yen in June. For the first time in 4 years, the pace of exports was slower compared to a year ago, falling 1.7% on the year. Exports have been slowing to the US and Europe, but they have now been joined by emerging economies as interest rates go up around the world to combat inflation. GER IFO Business Climate Index Slides to Lowest Level in 3 Years in July In Germany, the IFO business climate index took a plunge in July with the overall index declined almost 4 points to 97.5 from June's 101.3. Current conditions and future expectations both deteriorated and the overall reading was the lowest in 3 years. GER Services Resilient, but Manufacturing Weakens Preliminary data showed activity in the German manufacturing and services sector expanding, as the PMI's for both sectors was above the 50 level. The manufacturing sector saw a decline from June as global demand for German exports weakens. Services expanded, bucking the trend in other parts of Europe. EUR Manufacturing and Services PMIs Continue to Contract Looking at the Euro-zone as a whole, conditions are worse, as both sectors were in contraction. The manufacturing PMI slid to 47.5, and services fell to 48.3. Both were below forecasts, and show the Euro-zone struggling the second half of the second quarter. EUR Current Account Falls into Deficit in May The Euro-zone current account turned into a deficit of 7.3 billion euros, seasonally adjusted. The unadjusted figure was -21.4 billion Euros. The data reflects a worsening trade position. The deficit in goods was 3.3 billion in May, after a surplus of 7.1 billion in April. The services surplus also declined, but was still positive. EUR/JPY - Euro Hits Resistance and Retreats vs Yen The gloomy reports was reflected in weaker European stocks, and a decline in risk appetite for the Euro-Yen pair. From its highs this weak near 169.70, the pair has declined 130 pips testing 168.30. The pair has stalled after a strong rally last week, and with weaker data from the Euro-zone, and its declines versus the Dollar the Euro seems less strong than it did just last week. UK Ratail Sales Down 3.9%, Sharpest Decline Since at Least 1986 In the UK, retail sales were down 3.9% in June, according to the government, a sharp decline and the biggest monthly drop since records began in 1986. It reverses all the gains seen last month. Consumers, faced with a weakening economy, a recession in housing, and high inflation, are cutting back on spending. GBP/USD - Pound Falls on Retail Sales Data The Pound fell sharply vs. the Dollar following the release giving up the 2 to 1 level it reclaimed yesterday. The Pound-Dollar pair traded near 1.9840, a 160-pip slide from the session open, and below short term resistance at 1.99. US Jobless Claims Rise Above 400K, Highest Number in 4 Months In the US, weekly jobless claims jumped back above 400K, an increase of 34K compared to the previous week. The increase was the highest in 4 months, and was above expectations. A weakening job market will add more pressure on the US economy, which is already reeling from a housing recession and surging inflation as a result of higher oil prices. US Existing Home Sales Fall 2.6%, But Doesn't Weaken Dollar Existing home sales fell 2.6% in June, to an annual pace of 4.83 million units, which was lower than forecasts. Tighter lending standards continue to keep inventories high and prices falling, as there is a smaller pool of potential home purchasers. With Congress passing a massive housing bailout package it remains to be seen if the situation improves going forward and the news had only a slight impact on the Dollar's value. USD/CAD - Loonie Weakens on Bank of Canada Action One more piece of news to note is the jump in the US Dollar-Canadian Dollar around noontime after it was reported that the Bank of Canada injected $830 million of overnight liquidity, the largest injection since April 30th. The news caused a 50 pip jump to 1.0150. Upcoming Releases Tonight Japan release data on consumer and corporate price inflation. Overnight, the UK posts GDP data for the 2nd quarter, and a measure of services activity. Tomorrow, the US releases information of durable goods orders, new home sales, and consumer sentiment. Capital Market Services, L.L.C. www.cmsfx.com ©C2004-2005 Globicus International, Inc. and Capital Market Services, L.L.C. Any information in this report is based on data obtained from sources considered to be reliable, but no representations or guarantees are made by Capital Market Services, L.L.C. with regard to the accuracy of the data. 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