USD Slid Against JPY As JPY Enjoys Safe Haven Demand
ICM Brokers | Oct 22, 2014 02:09AM ET
EUR/USD
The euro slipped against the dollar and the yen on Tuesday following reports that the European Central Bank is considering corporate bond purchases and could decide on the matter as soon as December. The euro had gained ground against the dollar earlier in the session after third quarter growth data from China added to concerns over the outlook for the global economy. China’s economy grew at an annual rate of 7.3% in the three months to September, slightly higher than the 7.2% forecast by economists, but slowing from 7.5% in the second quarter. It was the slowest rate of growth since the first quarter of 2009, in the midst of the global financial crisis. The lackluster data added to concerns that weaker global growth could act as a drag on the U.S. economy, dampening dollar demand. The data came a day after Germany’s Bundesbank said the country’s economy barely grew in the third quarter. It said that while the euro zone’s largest economy was unlikely to enter a recession the economic outlook for the fourth quarter was cautious.
GBP/USD
The pound was steady near two week highs against the dollar on Tuesday as concerns over slowing global growth continued to cloud market sentiment following lackluster third quarter growth data from China. The slowdown fuelled fears that China will miss its annual growth target of 7.5% and added to speculation that the government will need to roll out fresh stimulus measures to avert a sharper slowdown. The weak data also added to concerns that weaker global growth could act as a drag on the U.S. economy, dampening dollar demand. Sterling showed little reaction after data showed that U.K. public sector finances deteriorated in September. The Office for National Statistics reports that U.K. public sector net borrowing was £11.8 billion in September, up £1.6 billion from the same month last year. Demand for the pound continued to be underpinned as investors looked ahead to Friday’s data on U.K. third quarter growth after recent economic reports saw investors push back expectations for a rate hike to the second half of 2015.
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USD/JPY
The dollar slid against the yen on Tuesday as the Japanese currency enjoyed safe-haven demand on news China's economy grew less in the third quarter when compared to the second. The yen lately has served as a safe-harbor asset class during times of economic and geopolitical uncertainty due to concerns that a cooling global economy may weigh on U.S. recovery and affect the timing of U.S. rate hikes next year. China’s economy grew at an annual rate of 7.3% in the three months to September, slightly higher than the 7.2% forecast by economists but still slower than the 7.5% rate recorded in the second quarter. It was the slowest rate of growth since the first quarter of 2009, in the midst of the global financial crisis, and the numbers pressured the greenback earlier on fears a slower global economy may dampen U.S. recovery. Meanwhile in the U.S., better-than-expected data out of the housing sector cushioned the greenback's slide against its Japanese counterpart. The National Association of Realtors said that existing home sales increased 2.4% to 5.17 million units in September from 5.05 million in August.
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