Major Currency Pairs Analysis: EUR Drops Against USD On Data

The euro dropped against the dollar on Wednesday after data revealed that existing home sales in the U.S. blew past expectations in July, which made the greenback an attractive venue to those waiting for the release of the Federal Reserve's July meeting minutes. The National Association of Realtors reported earlier that existing home sales jumped 6.5% to 5.39 million annual unit rate in July from June’s revised total of 5.06 million. Analysts were expecting U.S. existing home sales to edge up 1.6% to 5.15 million units. The numbers sparked hopes that the U.S. economy is improving to the point that the Federal Reserve will begin tapering its $85 billion monthly bond-buying program, which weakens the greenback to spur recovery.


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GBP/USD

The pound remained near two-month highs against its U.S. counterpart on Wednesday, after the release of positive U.S. new home sales data and as investors awaited the minutes of the Federal Reserve's most recent policy meeting later in the day. In a report, the National Association of Realtors said U.S. existing home sales rose to the highest level in three years in July. Sterling found support earlier, after a private sector report showed that U.K. manufacturing orders rose to a two-year high in August, adding to optimism over the economic recovery. The Confederation of British Industry said its total orders index rose to zero from minus 12 in July. That beat expectations for a reading of minus 8 and was the highest since August 2011. A separate report showed that the U.K.'s public sector posted a deficit of £1.6 billion in July. It was the first deficit for the month of July, which usually shows a surplus due to tax payments, since 2010.


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USD/JPY

The dollar rose against the yen on Wednesday after the release of the Federal Reserve's minutes from its July policy meeting, which hinted that the U.S. central bank remains on course to tapering stimulus measures despite a general lack of clarity as to when allowed for choppy trading. The Fed said in the minutes of its July policy meeting released earlier that most monetary authorities see a need to begin tapering monthly bond purchases soon, which strengthened the dollar, though the U.S. central bank remained unclear whether such a decision will come in September or later in the year. Thus, promting choppy trading. The numbers helped strengthen the dollar earlier before all eyes turned to the Fed minutes.


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USD/CAD

The U.S. dollar rose to six-week highs against the Canadian dollar on Wednesday, ahead of the keenly anticipated release of the minutes from the Federal Reserve’s latest policy setting meeting later in the session. Investors were awaiting the release of the minutes from the Fed’s July meeting later Wednesday for further indications as to when the central bank may start tapering its $85 billion-a-month asset purchase program. Market sentiment has been hit by mounting expectations that the Fed may start to phase out stimulus measures, known as quantitative easing, as soon as next month. Fed Chairman Ben Bernanke has said that the decision to start tapering will depend on whether economic data is strong enough.


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