• USD mixed as initial jobless claims rise

  • GBP weakens despite meeting growth expectations in Q2

  • Commodity currencies are stronger despite lower oil and copper prices

USD – The dollar was mixed this morning after the release of US durable goods and unemployment figures. The Commerce Department stated that orders for durable goods increased 4.2% last month. That followed a 5.2% gain in May, which was revised higher. Unemployment benefits rose last week, a sign that the labor market's recovery may have stalled. Initial jobless claims rose by 7,000 to a seasonally adjusted 343,000 for the week ending July 20. Also, the prior week's figures were revised to 336,000 new claims from an initially reported 334,000. Expectations that the Federal Reserve may start withdrawing stimulus as early as September may be dampened by the rise in unemployment. The market will look towards consumer confidence data due out tomorrow for further direction on the US economy.

EUR - The euro is flat after the release of mixed data out of the Eurozone. The Ifo institute’s business climate index rose to 106.2 from 105.9 in June. The increase was slightly more than the 106.1 widely expected in the markets. Unfortunately the Eurozone M3 money supply index for June dropped to 2.8% from 2.9%, missing the median estimate of 3.0%. In addition, market participants are digesting an unexpected fall in Spain’s unemployment rate. In other news, Eurozone group head Dijsselbloem commented yesterday on Greece and stated that all 22 conditions must be fulfilled by the country in order for the next disbursement of bailout funds to be issued next Monday. Look for the euro to hold close to current levels with gains remaining capped due to growing downside risk with the single currency.

GBP - The pound dipped 0.2% in early trading today after GDP data revealed the UK economy grew by 0.6% in the second quarter. Even though this number is in line with consensus expectations, there was some disappointment as in recent days some traders came to expect a slightly bigger GDP increase and positioned themselves accordingly. Looking further ahead, traders are focused on the forward guidance the BoE will provide next month regarding its own monetary policy, although most expect the BoE to keep interest rates low to support growth.

JPY - The yen rose 0.5% vs. the dollar today, pushing the USD/JPY back below the key psychological level of 100. There is no clear driver to this mini surge and investors remain focused on today’s release of Japan’s Consumer Price Index data for the month of June, widely expected to show a 0.1% increase year over year. Such an increase would be a step in the right direction for the Japanese economy from an inflation standpoint, as the BoJ remains steadfast in its commitment to achieving its target inflation goal of 2.0%.

Commodities - The Canadian dollar firmed slightly against the US dollar, up 0.3% from yesterday's close, in spite of plunging oil prices that dropped 1.75% to $105.39 a barrel and copper prices which fell over 1.0% to $6,969 a ton, ending a five-day run that had taken the industrial metal to a one-month high. Despite limited headline news today in Canada, CAD strength remains supported by the country’s retail sales in May which jumped by 1.9% m/m to hit a record high, a clear sign that 2nd qtr. growth could be significantly stronger than expected. The Australian dollar fell to a one-week low after the release of positive economic data from the US and disappointing data from China. The Australian dollar came under pressure during the offshore session on Wednesday night when US new home sales beat expectations in June, hitting the highest level in five years. Data yesterday showed manufacturing in China dropped to an 11-month low in July. Meanwhile, the New Zealand dollar is outperforming, up over 1.0% following the RBNZ policy decision and statement. The tone of the statement was more constructive on the outlook for the economy, noting more widespread economic growth, as policymakers mentioned that ‘removal of stimulus will likely be needed in the future.’ However, policymakers also made comments stating that ‘the New Zealand dollar remains high,’ which moderated its stand on exchange rates.

For more market reports go to Union Bank of California