The currency was undermined initially by a spike in risk aversion as the Shanghai equity markets declined sharply by over 5%. Commodity prices wee also sharply weaker during the day which was a negative influence.
The Euro-zone data was weaker than expected with a provisional 0.1% drop in German consumer prices for July to give an annual 0.6% decline. The IFO institute also reported that lending was more restrictive during July which will maintain fears over a credit crunch in the economy.
The headline US durable goods orders data was weaker than expected with a 2.5% decline for June, although the underlying data was firmer which should not have a major impact.
The Fed’s Beige Bok reported that the downturn was easing in most districts and was slightly more optimistic than the previous report. There were, however, still very important areas of weakness in the report with labour markets being reported as being very soft while there was also a deterioration in the commercial property sector. Bank lending also declined in most categories which will maintain speculation that any recovery in the economy will stall very quickly.
The jobless claims data on Thursday and GDP data on Friday will be important in determining near-term sentiment with increased defensive dollar demand if there are weak releases. The Euro dipped to lows near 1.40 in US trading before a slight corrective recovery.
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