The greenback rose broadly against major currencies after the release of better-than-expected U.S. durable goods orders, signaling the outlook for the world's biggest economy may improve.
Orders for U.S. durable goods orders excluding transportation equipment rose 2.5% in April (forecast was a 0.5% drop). Overall orders fell 0.5%, better than the expectation of a decrease of 1.5%, after a 0.3% drop in March. Interest-rate futures showed a 31% chance the Federal Reserve will raise its target rate by a quarter-percentage point to 2.25% on Sept. 16, up from 21% a week ago.
U.S. dollar rose from 103.90 to 105.32 and from 1.0260 to 1.0425 against the Japanese yen and Swiss franc respectively on risk aversion. The British pound fell briefly from 1.9828 to 1.9704 and then rebounding strongly on active cross buying in sterling especially versus euro and Japanese yen. Eur/gbp tumbled from 0.7955 to 0.7881 while gbp/jpy rallied from 205.26 to 207.68.
The single currency tumbled from 1.5761 to 1.5608 on Wednesday on dollar’s strength across the board on the better-than-expected U.S. durable goods data together with a separate report showed French consumer confidence dropped to a record low in May. However, euro pared its drop later in the day after a report showed inflation in Germany accelerated more than forecast in May. German consumer prices rose 3% in May from a year ago after rising 2.6% in April. The data supported expectations for the European Central Bank to retain its hawkish, inflation-fighting stance despite signs of an economic slowdown seen in recent sentiment surveys from euro zone member states.
The Australian dollar retreated initially to 0.9562 against U.S. currency as crude oil for July delivery dropped briefly to $125.96 per a barrel and then rebounded to close at 0.9629 on renewed buying in crude oil later in the day. The greenback rose briefly to 0.9959 versus the Canadian dollar and then weakened to 0.9890 on the rebounding in crude oil prices.
Thursday will see the release of Japan’s retail sales, U.K. Nationwide house price, German unemployment rate, eurozone business climate and economic sentiment, U.S. annualized GDP for first quarter of 2008, core PCE, jobless claims and personal consumption.