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EUR/USD Rises for Another Day as US Economy Underperforms

January 27, 2011 (Last updated on January 10, 2013) by

EUR/USD continues to rise as the US economy underperforms, while the outlook for the European economy improves. Durable goods orders and initial jobless claims showed far worse results than was expected, while news from the house market were good. The currency pair slumped at the beginning of this trading session, but quickly recovered. EUR/USD trades now at about 1.3745 after it dropped previously to 1.3637.

Initial jobless claims increased to 454k last week from the previous week’s revised figure of 403k. The increased was much bigger than the anticipated 407k growth. (Event A on the chart.)

Durable goods orders decreased 2.5% in December, following the 0.1% November decrease. The actual reading frustrated analysts, who promised an increase by 1.6%. This was the fourth decrease in the last five months. (Event A on the chart.)

The Pending Home Sales Index increased 2.0% in December, compared to a downwardly revised increase by 3.1% in November. The report showed much better growth than 0.9% growth expected by economists. The growth was because of “modest gains in the labor market and the improving economy”. (Event B on the chart.)

EUR/USD as of 2011-01-27

Yesterday several reports were released, showing that:

New home sales were at a seasonally adjusted annual rate of 329k, above the revised November rate of 280k and the median forecast of 302k.

Crude oil inventories increased by 4.8 million barrels and total motor gasoline inventories increased by 2.4 million barrels last week. Both are above the upper limit of the average range for this time of year.

The Federal Open Market Committee left the Federal Funds Rate near zero and said and its statement that “economic recovery is continuing, though at a rate that has been insufficient to bring about a significant improvement in labor market conditions”.

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