Daily Foreign Exchange Market Summary

The US dollar continues to weaken against a basket of currencies after mixed economic news. The Labor Department reported new claims for unemployment benefits fell last week to a seasonally adjusted 472,000 last week. Though unemployment benefits dropped for a second week in a row, the figures still remain too high to signal a change in fortune for the troubled labor market. The National Association of Realtors reported its Pending Home Sales index increased 5.2% to 79.4 in July. The Commerce Department reported US July factory ordered rose 0.1% to a seasonally adjusted $409.5 billion due to robust demand for new transportation equipment. With mixed economic news from the US, the focus will shift to tomorrow's widely watched monthly employment report, as the scarcity of jobs would be further confirmation of the deteriorating economy.

The euro edged higher after positive Spanish and French bond auctions and stable global equities. The euro rose 0.1% after Spain and France sold a combined 12.2 billion euros in bonds. The European Union statistics agency Eurostat reported that gross domestic product in the euro zone grew 1% in Q2 due to higher household spending and investment. The European Central Bank left interest rates unchanged at 1% as expected and extended its liquidity safe-net for vulnerable euro zone banks into next year.

The British pound lost its momentum on the dollar and euro after weaker than expected housing and construction data. Nationwide reported house prices fell 0.9% in August, the sharpest decline since February. The Markit / Chartered Institute of Purchasing and Supply construction PMI slipped to 52.1 in August as residential construction lost momentum. The fall in housing prices and slowing in construction added further fears that the fragile UK economic recovery could be running out of steam which put pressure on the pound.