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The dollar fell today against the euro and most other major currencies as an underlying weakness in the US economy was exposed. The final session of the week saw the release of the new home sales for the month of July, which had fallen by the most in 36 months.
The report resulted in the world’s most commonly traded currency snapping the three-day rally of the US dollar index, a benchmark used to determine the overall strength of the greenback. While today’s slump is certainly not to be overlooked, the US dollar does remain on course for a positive week as a whole. The greenback’s saving grace has most certainly being the Federal Open Market Committee releasing their minutes for their last meeting in which the majority indicated that they felt that the Federal Reserve could now begin to tapering their $85 billion a month monetary stimulus package.
Geoffrey Yu of UBS AG said, “Even though new-home sales data haven’t really been stellar, I think what we need is for the data to actually turn to the extent that it shows the Fed was wrong… We haven’t had a critical mass of negative data yet to derail the Fed. It’s a speed bump more than anything.”
The news saw the dollar declined by 0.2 percent as of around 8 PM in London, with the US dollar trading at 1.3380 against the euro.
July Home Sales
New-home sales for the month of July declined by a staggering 13.4 percent. If I’m sales continue at the same pace then the US economy would see 394,000 homes sold, while 455,000 would have been sold at the rate of June’s data. This resulted in the biggest single month decline since May 2010, more than three years ago.
The Dollar Index
The US Dollar Index, a benchmark compiled by Bloomberg, tracks the US dollar’s strength against 10 of its most commonly traded peers and is often used by analysts to determine the overall strength of the world’s most commonly traded currency – the greenback. The Dollar Index fell by 0.2 percent for the day after advancing by 0.2 percent earlier during the session. This left the benchmark with gains of 0.4 percent since Monday after peaking at 1031.37 during Thursday’s session.
Euro Makes Significant Gains
The Eurozone continue to make steady progress during today’s trading session, with the 17 nation currency maintaining its week-long rally and against Asia’s most commonly traded currency, the yen. Today’s gains came on the back of Ewald Nowotny, a member of the European Central Bank Governing Council, saying that the continued progress currently being made in the region meant that there was little reason the further interest rate cuts in the immediate future. Additionally, consumer confidence in Europe beat analysts expectations for the month, coming in at -15.6 after last month’s results of -17.4.