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U.S. Durable Goods Orders Strong, Euro Gains Anyway

Posted by Joseph Trevisani on Jul 25, 2013 11:42:00 AM

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Chief Market Strategist Joseph Trevisani In Reuters


FOREX-Dollar down against the euro and yen but no clear driver

Thursday July, 25, 2013 11:52am EDT

* German Ifo numbers just beat expectations

* Sterling falls after in-line UK GDP numbers

* NZD up, market sees less dovish RBNZ statement

NEW YORK, July 25 (Reuters) - The dollar slipped against the euro, yen and New Zealand dollar on Thursday as investors focused on good news in Europe and New Zealand but saw nothing to drive the U.S. currency in the near term.

The euro was near a one-month peak in New York trading after a German Ifo survey showed business morale was slightly better than expected in July. The influential think tank's business climate index rose to 106.2 from 105.9 in June, just beating the median 106.1 forecast.

The euro waxed and waned after the news but picked up momentum as U.S. buyers entered the market.

The New Zealand dollar rose to a one-month high as investors detected a more hawkish tone from the Reserve Bank of New Zealand.

The euro is "generally supported by recent strength in eurozone economic data that has signalled stabilization in the 17-member bloc's economy," said Omer Esiner, chief market analyst at Commonwealth Foreign Exchange in Washington.

"Yesterday's much stronger than expected euro zone PMI data signalled that the bloc's economy may have bottomed, while overnight, German Ifo business morale also topped market forecasts."

The euro was up 0.2 percent at $1.3231, having hit a session high of $1.3238. Surveys on Wednesday showed a quicker-than-anticipated expansion in German and French private sector business activity and lifted the euro to a one-month high of $1.3256.

Sterling also swung wildly in the global session after data showed the British economy grew 0.6 percent in the second quarter, picking up from the previous quarter for a 1.4 percent annual pace.

The pound was last up 0.1 percent at $1.5334 though traded more than a full cent in the move between the high of $1.5383 and the low $1.5265.

The Bank of England is expected to issue 'forward guidance' next month that it will keep rates low to support growth.

Despite Thursday's moves, the dollar's upward trend is expected to continue. It has shown a high correlation to Treasury yields in recent weeks as the market has focused on when the Federal Reserve might start tapering its monetary stimulus.

A report showed that, in dollar terms, headline U.S. durable goods orders totalled a record $244.5 billion, finally surpassing the previous peak of $242.96 billion seen in December 2007, the month the United States entered recession.

Durables orders troughed in April 2009, two months before the recession ended, at $144.4 billion.

"The demise of quantitative easing, made a bit more likely by today's orders number, has been deliberately and temporarily sidelined by the Fed, but it has not been cancelled as the next policy move," said Joseph Trevisani, chief market strategist at WorldWideMarkets in Woodcliff Lake, New Jersey.

The dollar fell 0.7 percent against the yen on Thursday to 99.53 yen. Yet the yen remains the worst performing of the 36 most actively traded currencies against the dollar year to date with a 13.6 percent drop.

Some US$4.4 billion in euros changed hands on Thursday, using Reuters data, with US$2 billion in yen.

The New Zealand dollar was up 1.5 percent at US$0.8045, near an earlier one-month high of $0.8056 as investors detected a more hawkish tone from the Reserve Bank of New Zealand.

"There was a lot more emphasis on the potential inflation spillover from construction costs and housing market," said Jane Turner, a senior economist at ASB Bank in London. "We still expect the RBNZ to first lift the official cash rate in March 2014."

If that prediction proves correct, New Zealand could be the first developed nation to begin a rate tightening cycle.



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