Recent dollar rally eased today as the greenback weakened against most of its peers following lackluster figures released on US factory orders and US trade balance. US factory orders dropped for the 2nd month in a row in September by 0.6% which diminished positive outlook on the speed of US economic recovery. The data led to a selloff in dollar profit taking erasing gains resulting from differing monetary policy with various central banks and solid figures on US manufacturing, consumer sentiment and GDP. US trade deficit grew by $3.04 billion between August and September well beyond forecasts.
The euro held on to advances against the dollar even though growth expectations for the euro zone were reduced. The European Commission slashed its economic growth expectation for the euro zone this year from 1.2% reported earlier this year to 0.8% while expectations for 2015 dropped from 1.7% to 1.1%.
The pound strengthened against a falling dollar after shrugging off data which showed that activity in the UK construction sector wound down to its lowest level in 5 months in October while there was a rapid decline in residential building growth. Markit released figures which showed that UK construction PMI dropped in October to 61.4 from 64.2 in September.
The yen strengthened against the dollar regaining ground after the market viewed the yen to be oversold following the Bank of Japan’s announcement to increase its monetary base target to a yearly increase of Y80 trillion in order to avoid risk of deflation, making reaching its target for inflation more tenable. Recent change in BOJ policy shocked the market tanking the yen however the currency was able to stabilize.
The Australian and New Zealand dollars strengthened against the dollar while the Canadian dollar weakened against the dollar. Statistics Canada released figures which showed that Canada’s trade balance moved into a surplus of C$0.71 billion in September after a deficit in August of C$0.46 billion while pundits had forecast the deficit to increase in September to C$0.70 billion.
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