EUR/USD
The euro dropped to fresh nine month lows against the U.S. dollar on Tuesday, as upbeat U.S. housing data and a report showing that U.S. inflation was in line with expectations last month lent broad support to the greenback. Meanwhile, sentiment on the single currency remained vulnerable after poor economic growth data last week added to pressure on the European Central Bank to implement fresh measures to shore up the faltering recovery in the region.
GBP/USD
The pound dropped to a four month low versus the dollar after a report showed U.K. inflation slowed more in July than economists forecast, giving the Bank of England extra room to delay raising interest rates. Sterling weakened against U.S. dollar after data published by the Office for National Statistics showed the rate of consumer-price inflation fell to 1.6 percent from a year earlier, compared with 1.9 percent in June. The central bank today is scheduled to publish the minutes of its August policy meeting, when officials left the benchmark rate at a record-low 0.5 percent. U.K. government bonds rose.
USD/JPY
The Japanese yen was little changed at 102.95 per dollar. Japan’s exports rose more than forecast in July, bouncing back from two straight declines to support an economy that contracted last quarter by the most since a record earthquake in 2011. Overseas shipments rose 3.9 percent from a year earlier, the finance ministry said in Tokyo today. Imports rose 2.3 percent, leaving a deficit of 964 billion yen ($9.36 billion).
USD/CAD
The Canadian dollar may weaken to a five-year low as slow economic growth and rising U.S. interest rates spark a retreat from the country’s corporate debt similar to that seen in government bonds. The currency could weaken more than five cents to C$1.15 per U.S. dollar over the next year as stronger U.S. growth prompts the Fed to increase record-low borrowing costs, Yu said. With higher interest rates available in the U.S., the relative yield advantage of Canadian corporate debt will disappear, eliminating a capital flow that’s supported the currency amid an exodus from the country’s government debt, he said.
