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Dollar weakens due to lacklustre data and fall in Treasury yields

USD

The dollar fell on Monday after data came out lower-than-expected and yields on U.S Treasury Bond’s also dropped.

Data from the Federal Reserve showed Industrial Production fell by -0.2% when it had been expected to rise by 0.2%, from a previous -0.5% result.

Manufacturing Production meanwhile also came out under-par, showing a -0.2% fall from 0.1% previously when a 0.3% rise had been forecast.

It was thought the data might impact on the Fed’s decision whether to raise interest rates early – possibly (although unlikely) even at their next meeting on Wednesday.

In a bright rare bright-spot for U.S data on Monday, however, the NAHB Housing Market Index in June came out at 59 from 54 previously when 56 had been estimated.

EUR

The euro actually gained on Monday despite negative news which increased fears that Greece might default and a possibly leave the euro.

During the weekend negotiations between Greek government representatives and creditor institutions in Brussels fell apart rapidly, with one report saying that they lasted only 45 minutes, before creditor negotiators walked out frustrated at the lack of compromise from Greece, which was not prepared to make reforms to pensions, wages, or budget surplus targets.

In another report one official described the gap between camps, as having widened to an “ocean,” which was the worst description of how negotiations were going since the process began.

On the data front it was a quiet day with the main result that the Trade Balance in April (on a seasonally adjusted basis) rose to 23.4bn, beating expectations of 19.0bn and rising from previous surplus of 19.9bn. The Trade Balance, un-seasonally adjusted, rose to 24.9bn from 23.4bn when it had been forecast to fall.

GBP

The pound ended the day higher on Monday, possibly as a result of continued positive outlook for the U.K economy and stronger House Price data, which may provide the stimulus for a recovery.

Despite a weak start, in which Greek debt fears weighed due to the U.K’s close proximity to the euro-zone, the pound recovered in later trading.

Credit rating agency Standard and Poor’s downgrade of the outlook of U.K debt to “negative” on Friday, due to concerns the country might leave the E.U, also told in early trading on Monday, however, as the day unwound the pound recovered, possibly due to the yield falling on U.S Treasury bonds, which have recently been a major driver of dollar strength.

On the data front Rightmove published House Prices, which showed an increase of 4.5% yoy in June, beating the previous 2.5% result. Month-on-month it increased by 3.0% from -0.1% in May.

JPY

The yen traded slightly above Friday’s close, at 123.44 in the second half of the New York session.

Japan’s Industrial production figures were revised upwards in April, rising 1.2% on a monthly basis following a fall of 0.8% in March and beating expectations of 1.0% jump.

Revised exports came in with a climb of 0.6% supported by a weak yen, however, the benefits from a weakened currency were not as high, as many factories were shifted their production overseas.

All in all, conditions in Japan’s economy seem to be improving, as final GDP grew 1.0% in the first quarter of 2015, better than 0.7% forecasted, supported by improvement in investment. Data showed that both gross fixed capital formation and investment of private non-residents gained.

USD

The dollar fell on Monday after data came out lower-than-expected and yields on U.S Treasury Bond’s also dropped.

Data from the Federal Reserve showed Industrial Production fell by -0.2% when it had been expected to rise by 0.2%, from a previous -0.5% result.

Manufacturing Production meanwhile also came out under-par, showing a -0.2% fall from 0.1% previously when a 0.3% rise had been forecast.

It was thought the data might impact on the Fed’s decision whether to raise interest rates early – possibly (although unlikely) even at their next meeting on Wednesday.

In a bright rare bright-spot for U.S data on Monday, however, the NAHB Housing Market Index in June came out at 59 from 54 previously when 56 had been estimated.

EUR

The euro actually gained on Monday despite negative news which increased fears that Greece might default and a possibly leave the euro.

During the weekend negotiations between Greek government representatives and creditor institutions in Brussels fell apart rapidly, with one report saying that they lasted only 45 minutes, before creditor negotiators walked out frustrated at the lack of compromise from Greece, which was not prepared to make reforms to pensions, wages, or budget surplus targets.

In another report one official described the gap between camps, as having widened to an “ocean,” which was the worst description of how negotiations were going since the process began.

On the data front it was a quiet day with the main result that the Trade Balance in April (on a seasonally adjusted basis) rose to 23.4bn, beating expectations of 19.0bn and rising from previous surplus of 19.9bn. The Trade Balance, un-seasonally adjusted, rose to 24.9bn from 23.4bn when it had been forecast to fall.

GBP

The pound ended the day higher on Monday, possibly as a result of continued positive outlook for the U.K economy and stronger House Price data, which may provide the stimulus for a recovery.

Despite a weak start, in which Greek debt fears weighed due to the U.K’s close proximity to the euro-zone, the pound recovered in later trading.

Credit rating agency Standard and Poor’s downgrade of the outlook of U.K debt to “negative” on Friday, due to concerns the country might leave the E.U, also told in early trading on Monday, however, as the day unwound the pound recovered, possibly due to the yield falling on U.S Treasury bonds, which have recently been a major driver of dollar strength.

On the data front Rightmove published House Prices, which showed an increase of 4.5% yoy in June, beating the previous 2.5% result. Month-on-month it increased by 3.0% from -0.1% in May.

JPY

The yen traded slightly above Friday’s close, at 123.44 in the second half of the New York session.

Japan’s Industrial production figures were revised upwards in April, rising 1.2% on a monthly basis following a fall of 0.8% in March and beating expectations of 1.0% jump.

Revised exports came in with a climb of 0.6% supported by a weak yen, however, the benefits from a weakened currency were not as high, as many factories were shifted their production overseas.

All in all, conditions in Japan’s economy seem to be improving, as final GDP grew 1.0% in the first quarter of 2015, better than 0.7% forecasted, supported by improvement in investment. Data showed that both gross fixed capital formation and investment of private non-residents gained.



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