Forex Afternoon Wrap – 27/07

Jul 27, 1:09 pm

Currency markets quiet as Yen strengthens on China equity market concerns!

Key Notes:

  • Japan SPPI y/y 0.4% vs. 0.6%
  • German import prices m/m -0.5% vs. 0.2%
  • German Ifo business climate 108 vs. 107.6
  • Eurozone private loans y/y 0.6% vs. 0.7%
  • UK CBI industrial order expectations -10 vs. -4
  • US Core durable goods orders m/m 0.8% vs. 0.4%
  • US durable goods orders mm 3.4% vs. 3.2%

The Asian markets were under pressure since the early session as the Shanghai composite index fell more than -8%, marking one of the biggest single day declines. The fall in shares comes despite the state interventions to halt the decline in the equity markets since early June. The Japanese Yen was trading stronger for the day as the Greenback failed to hold its ground. USDJPY fell from the opening highs of 123.83 and continued its decline, trading near 123.17 at the time of writing.

The Aussie Dollar was trading flat for the day with no major market moving events from Australia. The Kiwi managed to stay strong for the day after the currency fell against the Greenback from the highs of 0.6694 last week. NZDUSD was trading higher since the open, currently at 0.6614.

The European trading session saw German import prices fall -0.5%, against expectations of a rise of 0.2%. The news was however offset by the German Ifo business climate which rose to 108, beating estimates of 107.6 and also posting the first increase in three months. The Ifo reading for the current conditions rose to 113.9 in July, up from 113.1 a month before.

The Euro was trading stronger for the day as the currency opened near the lows of 1.0977 and rallied to post a session high to 1.11 before easing back lower. However, EURUSD remains well supported above the 1.10 handle.

There was no major news from the UK this morning and the British Pound was trading largely flat for the day ahead of tomorrow’s first estimate release for the second quarter GDP, which is expected to show that the UK economy grew at a pace of 0.7%, up from 0.4% in the previous quarter. GBPUSD opened the day near 1.551 and was seen trading in a tight range.

From the US, the monthly durable goods orders data released showed a continued pickup in activity. Core durable goods orders for the month increased 0.8% while the durable goods excluding volatile components grew at a pace of 3.4%. The better than expected data did not see much of a reaction from the Greenback which has been trading weaker since this morning after opening the week at 97.35. The US Dollar Index was trading at 96.69 or about -0.69% lower. The US Federal Reserve will also be releasing its monetary policy report later this week and the Greenback is most likely to trade sideways ahead of the FOMC statement.

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John has over 8 years of experience specializing in the currency markets, tracking the macroeconomic and geopolitical developments shaping the financial markets. John applies a mix of fundamental and technical analysis and has a special interest in inter-market analysis and global politics.

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