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Home » Online Forex Trading Blog » Data Mix Boosts Equities, Weakens USD

Data Mix Boosts Equities, Weakens USD

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Better than expected news from the US Labor Department was offset by disappointing news from the Commerce Department sending equity markets higher as the dollar lost ground against major currencies. The European Central Bank (ECB) and the Bank of England (BOE) held firm on record low interest rates sending equity markets in the region upwards.

In Washington, The Labor Department reported that initial claims for state unemployment benefits dropped by 20,000 to a seasonally adjusted 331,00, below the projected 335,000. Analysts anxiously await Friday’s non-farm payroll report. Early projections indicate gains of 175,000 job after December’s disastrous 74,000 new jobs. A disappointing number could send tremors through equities and weaken the dollar while a favorable number a could lift both arenas.

After the report, the dollar posted gains against the euro, yen and GBP but after weaker than expected export data, the dollar softened. The Commerce Department reported that December exports slumped 1.8 percent to $191.30 billion. Meanwhile, imports edged higher 0.3 percent to $230.0 billion. Including adjustments to inflation, the trade deficit increased to $49.5 billion. December marked the biggest slump in export trade since October 2012.

Previous government reports had cited the strength of the export trade as a key factor in the fourth quarter’s 3.2 percent rise in GDP.

ECB and BOE Policy Statements

The ECB and BoE acknowledged pressure from the emerging market currency crisis but declined to raise interest rates. The BoE is under pressure to raise rates but deferred at this time.

Mario Draghi of the ECB indicated that inflation was within acceptable limits and more data was needed to recommend a rate hike. Draghi maintains that the central bank is prepared to step in with support if needed and will monitor the emerging currencies carefully. It remains unclear what tools Draghi as at his disposal.  

The euro zone recovery is more fragile than the US recovery or the recovery in the UK. However, Draghi suggested that economic data from inside and outside the euro zone in March could influence the bank.

The BoE seems to face the greatest resistance to continued low rates but for the time being, no increases are planned.

New European Union – US Trade Agreement in Works

Reuters reports that a new European Union- US trade agreement could be announced early next week. The two sides are scheduled to exchange plans on Monday.

European Commission trade head Karel De Gucht, will meet with US trade head Michael Froman to work out details related to new duty relief in trades between the world trading powers.

Sources told Reuters that 96 percent of existing import duties will be lifted from US goods. Several products will be protected bun the agreement is broad in scale.

The two trading partners already enjoy favorable trade rates but further lowering should benefit both sides. Analysts project gains of about $100 billion per year for both parties.

The news is good for American beef growers as twice the amount of beef exports to Europe will be permitted upon approval of the agreement. This element of the accord is resisted by France and Ireland, two prominent beef raising nations.

The new pact would be particularly well-received well by automakers. Currently, import fees on vehicles amounts to more than $1 billion annually.

Euro – USD – 1.3600 (+0.51%)

GBP – USD – 1.6339 (+ 0.16%)

USD – Yen – 101.84 (+0.40%)

USD – CAD – 1.1101 (+0.17%)

USD – Ruble – 34.6640

 

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About the Author -

Hiland is a professional writer with extensive entrepreneurial experience. He is a graduate of St. George’s School Newport, RI and the State University of New York at Albany where he majored in history. He has been active in the real estate business for 30 years and has founded and sold several businesses. Hiland currently writes for several financial sites and is a published author of the novel The Last Parade. He has recently completed a manuscript for a children’s book entitled Sami and The Minnow Man.

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