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EUR/USD Fails to Rally on FOMC Statement

July 29, 2015 by

EUR/USD fell today even though data released during the current trading session was favorable to the currency pair. Neither falling pending home sales, nor FOMC statement, which was somewhat dovish, could help the euro to gain on the dollar. The shared 19-nation currency attempted to shoot to upside after the release of the policy statement but lost its gains very quickly.

Pending home sales fell 1.8% in June instead of rising 1.0% as analysts had predicted. Moreover, the previous month’s increase was revised negatively from 0.9% to 0.6%. (Event A on the chart.)

US crude oil inventories dropped 4.2 million barrels last week versus the predicted decrease of just 0.1 million and the previous week’s increase by 2.5 million. Total motor gasoline inventories dropped 0.4 million barrels but were in the middle of the average range. (Event B on the chart.)

FOMC ended its two-day policy meeting today, making no changes to the existing monetary policy. Regarding timing of the planned interest rate hike the statement said:

The Committee anticipates that it will be appropriate to raise the target range for the federal funds rate when it has seen some further improvement in the labor market and is reasonably confident that inflation will move back to its 2 percent objective over the medium term.

While it provided no specific date, the wording gave impression that the Federal Reserve is not in a hurry to start monetary tightening, meaning that a rate-lift off is not likely to occur in September. (Event C on the chart.)

On Monday, a report on durable goods orders was released, showing an increase by 3.4% in June, above the 3.2% gain projected by analysts. On the negative side, the May’s drop was revised from 1.8% to 2.2%. (Not shown on the chart.)

Yesterday, several reports were released. (Not shown on the chart.)

S&P/Case-Shiller home price index rose 4.9% in May from a year ago, trailing the median analysts’ estimate of 5.2% and the previous month’s increase of 5.0%. Month-on-month, the gauge was up 1.1%.

Flash Markit services PMI edged from 54.8 in June up to 55.2 in July, in line with expectations.

Richmond Fed manufacturing index demonstrated a strong gain from 7 to 13 this month while experts predicted no change.

Consumer confidence fell from 99.8 last month (a substantial negative revision from the initial reading of 101.4) to 90.9 in July. It was an unexpected turn of events as the median forecast promised an increase to 100.1.

EUR/USD for 2015-07-29

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