Big Week Ahead Could Cause Sharp Moves in the US Dollar (page 2 of 2)

British Pound

The British pound ended the day flat against both the Euro and the US dollar. Preliminary second quarter GDP figures were right in line with expectations, rising by 0.8 percent on a quarterly basis and 2.6 percent on an annualized basis.

This represents acceleration from the 0.7 percent quarterly and 2.3 percent annualized growth that we saw in the first quarter. The components of the report were mixed with private consumption and government spending increasing more than expected but imports and exports both fell short of expectations.

There is little more to garner from this report and UK markets are closed on Monday for the Summer Bank Holiday. There is no significant UK data due until Thursday which means that like this week, the pound will probably continue to driven by dollar based news - which there will be plenty of.

Japanese Yen

The Japanese Yen sold off across the board today with EUR/JPY closing just shy of the record high that it hit today. The combination of disappointing consumer price numbers, the fear that the tropical depression could become a major storm in the Caribbean and overall dollar bullishness has put major pressure on the Japanese yen.

Traders were banking for a strong CPI report to give the Bank of Japan a reason to raise interest rates sooner rather than later. Unfortunately the 0.1 percent drop in national prices and the flat core rating for the month of July reduced that possibility. Part of the drop however was due to the change in methodology of calculating the CPI.

Under the old calculation methods, core prices would have printed up 0.6 percent compared to an unchanged reading. The week ahead brings more important data that could alter the outlook for the yen. This includes reports on the labor market, consumer spending, housing starts and industrial production.