Major Currency Pairs Analysis: USD Suffers From Weak Durable Goods

The dollar took back earlier losses against the euro on Monday after investors digested disappointing U.S. durable goods numbers and snapped up nicely priced greenback positions afterwards to await fresh cues from the Federal Reserve on the fate of monetary stimulus measures. The Commerce Department reported earlier that U.S. durable goods orders dropped 7.3% in July, outpacing expectations for a 4.0% decline. The July figure marked the largest decline since August 2012. Core durable goods orders, which are stripped of volatile transportation items, fell 0.6% last month, defying expectations for a 0.5% increase. On Tuesday, the Ifo institute is set to release its German business climate report, while the U.S. is to publish private-sector data on house price inflation as well as a closely watched report on consumer confidence.

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GBP/USD

The pound held steady against the U.S. dollar in subdued trade on Monday, as markets in the U.K. remained closed for a holiday, after downbeat U.S. durable goods data eased expectations for the Federal Reserve to reduce asset purchases as soon as next month. The Commerce Department said durable goods orders dropped 7.3% in July, worse than expectations for a 4% decline. It was the largest decline since August 2012. Core durable goods orders, excluding volatile transportation items, fell 0.6% last month, defying expectations for a 0.5% increase. The data came after a report on Friday showed that U.S. new home sales fell by a larger-than-forecast 13.4% in July, the largest decline in more than three years. The weak data added to uncertainty over whether the Fed will start to taper its $85 billion-a-month asset purchase program next month.

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USD/JPY

Bank of Japan Governor Haruhiko Kuroda said over the weekend that the bank's aggressively loose monetary policies, including asset purchases, have started to boost the economy, which gave the yen support. The dollar fell against the yen on Monday after U.S. data on July durable goods orders disappointed investors by keeping sentiments alive for many that the Federal Reserve won't rush begin tapering stimulus programs. The dollar, however, managed to take back earlier losses against other currencies as many market participants concluded that the Federal Reserve remains on track to begin winding down the pace of its asset purchases this year, with many investors still convinced tapering will begin in September. The safe-haven yen, however, remained higher against the greenback.

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USD/CAD

The loonie, as the Canadian dollar is also known, was trading close to 22-month lows against the euro, with EUR/CAD rising 0.14% to 1.4064. Demand for the single currency continued to be underpinned after a senior European Central Bank policymaker said Friday he did not see many arguments for a rate cut following a recent series of improved economic data from the region. The U.S. dollar pared back gains against the Canadian dollar on Monday after official data showed that U.S. durable goods orders fell at its fastest pace in almost a year this July. The Commerce Department said U.S. durable goods orders dropped 7.3% in July, worse than expectations for a 4% decline. It was the largest decline since August 2012. Core durable goods orders, excluding volatile transportation items, fell 0.6% last month, defying expectations for a 0.5% increase.

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