FX Market Summary 07-25-2014: Euro Stumbles Into The Weekend

The dollar overall held a firm tone on Friday without being able to make a decisive break through major technical levels while the Euro was on the defensive. A further improvement in German consumer confidence did not have a significant impact, but there was a negative reaction to the latest IFO release. There was a decline to 108.0 for July from 109.7, the third successive decline and lowest reading since October 2013 with companies more downbeat over export prospects.

Latest Euro-zone money-supply data remained very fragile with only a small recovery in annual growth to 1.5% from 1.1% while there was a further annual contraction in lending of 1.7%. EUR/USD spiked lower following the data release with a dip to test support in the 1.3440 region before stabilising. USD/JPY found support close to 101.70 and moved to highs around 101.90.

The second-quarter UK GDP estimate met market expectations with the second successive 0.8% quarterly gain and a 3.1% annual increase. Although of only limited practical importance, the economy also moved above the 2008 previous GDP peak. GBP/USD was unable to regain the 1.7000 level and dipped to test support near 1.6960 before steadying.

The data added little to the on-going Bank of England tightening debate with the central bank focussing on potential wage trends. The latest Hometrack survey suggested housing-market momentum had stalled, especially in the London area, which will dampen pressure for a rate hike to some extent and curbed further Sterling support.

US durable goods orders were slightly ahead of estimates with a 0.7% gain for June and an underlying 0.8% monthly advance. The data provided no clear dollar support and USD/JPY temporarily backed away to the 101.80 area before drawing in fresh buyers.

The Euro was unsettled by Russian stresses as the central bank hiked interest rates to 8.0% from 7.5%, increasing the risks of further damage to the Russian economy which would also have an important negative Euro-zone impact. EUR/USD dipped to test support near 1.3425 before finding some marginal relief late in Europe.

The New Zealand dollar has remained on the defensive over the past 24 hours with NZD/USD lows below 0.8550 which also tended to drag AUD/USD lower with a test of support near 0.9400 while USD/CAD moved to the 1.0780 area.

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