- USD Index down by 1 percent overnight
- US Factory orders down
- EUR rally on news of Greek debt payment proposal
- AUD found a support for now
The US dollar continued its sell off yesterday. The US Dollar Index fell over 1 percent after another release of disappointing economic data. This seems to add to a growing case that the economy may be losing its momentum and another sub-3 percent growth year may be in store.
After Monday’s a poor consumer spending report, the Commerce Department reported yesterday that the December factory orders declined by 3.4 percent month-on-month as demand fell across a broad sector of industries. Inventories were also adjusted down by 0.3 percent in December, suggesting the factories are not ramping up their production to meet a much anticipated surge in consumer demand that has yet to materialize.
The decline in factory orders last month was the fifth consecutive monthly drop, and this adds to a recent series of disappointing data for the economy. The 4th quarter Gross Domestic Product report from last week showed that the economy expanded by just 2.6 percent compared to 5.0 percent in the previous quarter. The December Manufacturing Purchasing Manager Index, released earlier in the week, also showed a measurable slowdown in general manufacturing activities.
Subsequently, the market is beginning to have second thoughts about the growth prospect. Many traders who assumed the economy will be strong this year sold some of their dollar holdings yesterday.
The January ISM Non-manufacturing Purchasing Manager Index (PMI) will be released this morning. If the PMI read is another disappointing one then more dollars could sold off. Stay tuned.
EUR-USD rallied to nearly 2-weeks highs of 1.1534 overnight after a new Greek government proposed a “workable” debt restructuring proposal to the “troika,” thus reducing the possibility of debt default. The Greek Finance Minister is scheduled to meet the ECB President today to discuss the details.
GBP-USD climbed above 1.5150 overnight. The January Manufacturing and Construction PMI reports were better than expected and pointed to some encouraging growth momentum for the first quarter. The Bank of England’s monetary policy decision will be announced tomorrow.
USD-CAD continued to rally lower and is trading below 1.2450 as crude oil price continues its rally to $53 per barrel. The crude oil price has increased by 20 percent since last Thursday, and this has fueled speculation that the Bank of Canada will not make another rate cut in March.
AUD-USD has plunged below 0.7700 overnight after the Reserve Bank of Australia cut the short term interest by 0.25 percent yesterday. This morning, the pair has found a temporary support at 0.7760.
Have a great day!