Major Currency Pairs: EUR/USD Turns Lower, USD/CAD Higher

The euro turned lower against the dollar on Friday as uncertainty over when the Federal Reserve will start to pull back its stimulus measures dented market sentiment. Safe haven demand for the dollar was boosted on Friday after the University of Michigan said its consumer sentiment index fell from a six-year high of 85.1 in July to 80.0 in August. Economists had expected the index to tick up to 85.5. Separate reports showed that U.S. housing starts rose less-than-expected in July and building permits also fell short of expectations last month. Eurostat said the euro zone’s economy expanded by 0.3% in the three months to June. Economists had expected quarter-on-quarter growth of 0.2%. France’s economy expanded 0.5%, following two consecutive quarters of contraction, while Germany’s economy expanded by a larger than forecast 0.7%.
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GBP/USD
The pound ended the week close to two-month highs against the dollar on Friday after employment and retail sales data out of the U.K. boosted the outlook for the economic recovery. The dollar edged higher against sterling on Friday after the University of Michigan said its consumer sentiment index fell from a six-year high of 85.1 in July to 80.0 in August. Economists had expected the index to tick up to 85.5. Separate reports showed that U.S. housing starts rose less-than-expected in July and building permits also fell short of expectations last month. The pound remained broadly supported after data showed that U.K. jobless claims fell more than expected in July, while retail sales rose strongly. Data on Thursday showed that U.K. retail sales climbed 1.1% in July, beating expectations for a 0.6% gain and were 3% higher from a year earlier, as sunnier summer weather boosted sales of food, alcohol, clothing and outdoor items.
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USD/JPY
The Cabinet Office said Japan’s economy expanded by 0.6% in the three months to June and grew by 2.6% on a year-over-year basis. Economists had forecast quarter-on-quarter growth of 0.9% and an expansion of 3.6% on a year-over-year basis. The dollar was boosted after the University of Michigan said its consumer sentiment index fell from a six-year high of 85.1 in July to 80.0 in August. Economists had expected the index to tick up to 85.5. Eurostat said the euro zone’s economy expanded by 0.3% in the three months to June. Economists had expected quarter-on-quarter growth of 0.2%. France’s economy expanded 0.5%, following two consecutive quarters of contraction, while Germany’s economy expanded by a larger than forecast 0.7%.In the week ahead, investors will be looking ahead to Wednesday’s minutes of the Federal Reserve’s most recent meeting, while U.S. data on initial jobless claims and the housing sector will also be closely watched. Manufacturing data from China and service and manufacturing data out of the euro zone will also be in focus.
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USD/CAD
In Canada, official data on Friday showed that manufacturing sales fell 0.5% in June, the fourth decline in six months, confounding expectations for a 1% increase. A separate report showed that non-resident investors reduced their holdings of Canadian securities by CAD15.4 billion in June, the largest reduction since October 2007. In the week ahead, investors will be looking ahead to Wednesday’s minutes of the Federal Reserve’s most recent meeting, while U.S. data on initial jobless claims and the housing sector will also be closely watched. Canadian data on retail sales and consumer inflation will also be in focus. The U.S. dollar was higher against the Canadian dollar on Friday as unexpectedly weak data on U.S. consumer sentiment bolstered safe haven demand for the greenback. Safe haven demand for the dollar was boosted on Friday after the University of Michigan said its consumer sentiment index fell from a six-year high of 85.1 in July to 80.0 in August. Economists had expected the index to tick up to 85.5. Separate reports showed that U.S. housing starts rose less-than-expected in July and building permits also fell short of expectations last month.
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