The dollar is strong and hovers at its highest level against the euro in almost a year as the divergence between Europe and the United States grows.
As the US economy shows continuing signs of growth, economic prospects for Europe are dimmer, leading to speculation of looser monetary policy from the European Central Bank. Poor German economic data and comments by European Central Bank chief Mario Draghi recently have pressured the euro which slid against the dollar to 1.3178 today, a fresh 11-month low and was last at the key 1.3200 level.
A main risk event for the euro will be the ECB policy meeting on September 4, which will be closely watched to see if the Bank will introduce any more policy measures after Draghi noted in his Jackson Hole speech on Friday that inflation in the Eurozone was low.
Sterling was trading within yesterday’s range against the dollar, reaching highs of 1.6594 and touching lows of 1.6564.
The dollar was given extra support today after US durable goods orders surged to a record high in July. Orders for long-lasting manufactured goods jumped 22.6%, mainly due to a strong international demand for aircraft. Today’s figure comes after an upwardly revised 2.7% increase in June and beat forecast for a 7.5% increase.
Apart from aircraft orders driving the durable goods orders numbers, automobiles also played a role in hiking the numbers. In terms of orders excluding transportation, core durable goods orders only actually fell by 0.8%, despite forecasts for a 0.5% increase from a previous 1.9% increase.
The dollar failed to hold above the key 104.00 yen level after spiking on the US data to 104.02 and fell back to pre-data levels, last at 103.86. The dollar is extremely overbought and so any gains to the upside will likely be capped.
Upcoming US data include Consumer Confidence data from the Conference Board.