The Euro strengthened to touch an intraday high of 1.4126 as the U.S. dollar slumped across the board. Despite the slight recovery in the Euro, economic activity in the Euro-Zone remains subdued as foreign demands falter.
[U][B]Talking Points[/B][/U]
[B]• Japanese Yen: Increased Risk Appetite Trims Gains
• Pound: Holding at 1.77
• Euro: Moves to the Upside to Break 1.41
• US Dollar: Retail Sales and Producer Prices on Tap
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[U][B]Euro Bounces to the Upside, Overlooks Recessionary Fears[/B][/U]
The Euro strengthened to touch an intraday high of 1.4126 as the U.S. dollar slumped across the board. Despite the slight recovery in the Euro, economic activity in the Euro-Zone remains subdued as foreign demands falter.
Euro-Zone employment increased at its slowest pace in two years, rising 0.2% in the second quarter, while the yearly figure slipped to 1.2% from 1.6%. Meanwhile, industrial production fell more than expected, slipping to -1.7% from the previous year. What’s more is that the previous figure was revised lower to -0.8% from an initial reading of -0.5%, which signals that the slowdown in the global market has clearly taken a toll on the European economy. Sluggish labor demands paired with lower production suggests that economic activity may weaken further as Germany and Spain are on the brink of a recession.
The Japanese economy contracted at its fastest pace in seven years in the second quarter, driven by a slump in domestic and foreign demands. Annualized GDP was revised lower to -3.0% from an initial reading of -2.4%, while the quarterly reading was revised to -0.7% from -0.6%. Fading export demands has left the world’s second largest economy on the brink of a recession, while domestic demands may slow further as Japanese consumers continue to face higher living costs.
U.S. advance retail sales are due out for release at the beginning of the trading session, and may stoke increased volatility in the greenback as the headline figure is anticipants to rise 0.2% after falling 0.1% in the previous month. Meanwhile, the U. of Michigan confidence index and business inventories are expected to improve as well, which would boost buying pressures for the dollar. Furthermore, a rise in producer prices is likely to raise the interest rate outlook for the Fed, which would further induce bullish sentiment for the reserve currency.
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