The dollar is losing ground against the Euro and the Japanese Yen Tuesday afternoon, but is holding onto gains against the British pound. The stronger than expected German business confidence data is a source of strength for the Euro Tuesday, while dovish comments from the Bank of England are driving the pound lower.
Meanwhile, U.S. economic data proved mixed this morning. The upward revision to third quarter GDP matched expectations, but consumer confidence logged an unexpected decline in November.
Economic activity in the U.S. increased by more than previously estimated in the third quarter, according to a report released by the Commerce Department on Tuesday. The report said real gross domestic product climbed by 2.1 percent in the third quarter compared to the previously reported 1.5 percent increase. The upward revision matched economist estimates.
Home prices in major U.S. metropolitan areas rose by more than expected in the month of September, according to a report released by Standard & Poor’s on Tuesday. The report said the S&P/Case-Shiller 20-City Composite Home Price Index increased by a seasonally adjusted 0.6 percent in September after inching up by 0.1 percent in August. Economists had expected the index to rise by 0.3 percent.
Consumer confidence in the U.S. has unexpectedly seen a substantial deterioration in the month of November, the Conference Board revealed in a report on Tuesday. The Conference Board said its consumer confidence index tumbled to 90.4 in November from an upwardly revised 99.1 in October.
The steep drop came as a surprise to economists, who had expected the index to climb to 99.6 from the 97.6 originally reported for the previous month.
The dollar slipped to a low of $1.0673 against the Euro Tuesday, but has since inched back to around $1.0650.
German business confidence unexpectedly rose in November to its highest level since the middle of last year, offering more evidence that the biggest euro area economy continues to remain unscathed by events such as the Volkswagen pollution cheating scandal and the Paris terrorist attacks.
The business confidence index rose to 109 from 108.2 in October, marking its best reading since June 2014’s 109.4, the results of the monthly survey by the Munich-based Ifo Institute showed Tuesday. Economists had expected the index to hold steady after easing in the previous month.
Germany’s economic growth slowed as estimated in the third quarter on weak foreign trade and investment, data published by Destatis showed Tuesday. Gross domestic product advanced 0.3 percent from the prior quarter, in line with the preliminary estimate published on November 13. But the pace of growth eased from 0.4 percent expansion seen in the previous quarter.
French manufacturing confidence dropped for the second straight month in November as expected, though slightly, figures from the statistical office Insee showed Tuesday. The manufacturing confidence index fell marginally to 102 in November from 103 in the previous month. The reading was also came in line with expectations.
U.K. interest rates are likely to remain low for some time, Bank of England Governor Mark Carney said at the Treasury Committee hearing on Tuesday.
“One of the concerns in a low prolonged interest rate environment, which we clearly are in, and are likely to remain for some time, even with limited and gradual rate increases – it still will be a relatively low interest rate environment,” Carney said.
In the Inflation Report, the BoE had dampened the prospect of an interest rate hike in the near term, and suggested that interest rates are unlikely to rise until late 2016 as inflation is expected to remain low.
The bank projected the economy to grow 2.7 percent this year and 2.5 percent in 2016. Inflation is forecast to remain below 1 percent until the second half of next year.
The buck climbed to a high of $1.5052 against the pound sterling Tuesday, but has since eased back to around $1.5085.
The greenback has extended yesterday’s weakness against the Japanese Yen, falling to around Y122.300, from around $123.250 Monday morning.
Japan’s manufacturing activity expanded at the fastest pace in twenty months in November, as output growth quickened, the latest flash survey from Markit Economics showed Tuesday. The Markit/ Nikkei Manufacturing Purchasing Managers’ Index, or PMI, rose to 52.8 in November from 52.4 in October.
The material has been provided by InstaForex Company – www.instaforex.com