The U.S Dollar rose against the Euro and Yen yesterday on growth in U.S. manufacturing and doubts about Greece’s ability to honor a pledge for further austerity measures in return for an aid package.
The Euro continued to fall against the U.S Dollar yesterday as longer term concern over the Euro-Zone sovereign debt contrasted with solid U.S economic data. The U.S data, which showed a strong reading in manufacturing and construction spending, illustrate a U.S economy that continues to drag itself out of the worst recession since the Great Depression. This compares with the Euro Zone where investors remain worried about the implementation of the unprecedented €110billion aid package for Greece. The EUR/USD closed at 1.31974 yesterday, after hitting a low of 1.31530.
The U.S. manufacturing sector grew in April at its fastest pace in almost six years and at a rate that was above expectations, according to an industry report released Monday. The Institute for Supply Management’s said its index of national factory activity rose to 60.4 in April from 59.6 a month earlier. The data represents a ninth straight month of gains, with the headline index at its highest since June 2004.
The U.S Dollar hit an 8-1/2 month high against the Yen as U.S. manufacturing data boosted optimism about the economic recovery. Following the release of the report, the USD/JPY struck a high of 94.774, up 0.82% from yesterday’s opening price. Strong U.S. data has increased expectations the Federal Reserve will raise interest rates later this year, while the Bank of Japan is seen keeping rates low indefinitely.
The USD continued to appreciate against the Japanese Forex currency this morning as signs the global economic recovery is gaining momentum damped demand for Yen as a refuge. The USD/JPY rose to a trading high of 94.970, up 0.30% from today’s opening price of 94.689.
Consumer spending in the U.S. rose in March by the most in six months, pointing to a recovery that may accelerate when the economy creates more jobs. Boosted by spending on autos and other durable goods, real U.S. consumer spending increased 0.6% to reach a record high level in March, at last surpassing the pre-recession peak set in November 2007, the Commerce Department reported yesterday. With spending growing much faster than incomes in March, the personal savings rate fell to 2.7%, the lowest since September 2008.
Later today, the National Association of Realtors will release the number of pending home sales for the month of March. Pending home sales are expected to rise for the second consecutive month in March, which could be an indication that existing home sales will pick-up in the second quarter. In February, pending sales in the U.S recorded their sharpest jump since 2001, rising a record 8.2%. This time around, the market predicts a slightly smaller rise of 3.9%.
Tomorrow, the US will release its ADP Non-Farm Employment Change, an important gauge of the labor market conditions and generally considered a predictive index for Friday’s highly awaited Non-Farm employment change. This ADP figure is predicted to show an increase of 29K in the number of employed people compared to a loss of 23K in the previous month.
