Forex - Focus on Euro-zone GDP

The latest FOMC decision was as expected, with no change to the Fed Funds target range and no additional purchases of Treasury. The dollar immediately strengthened following the statement before it gave up its gains just as quickly as investors remain uncertain whether previous correlations between risk-seeking and dollar weakness should persist. But the FOMC statement, at the very least, did not spark a mass exodus from the dollar. The dollar finally edged lower after the Federal Reserve painted a less gloomy outlook for the U.S. economy, an assessment that led investors to return to commodity-linked currencies. The euro was firmer as were other high-yielding currencies like the Australian and New Zealand dollars, which made impressive gains against the USD and the JPY after being sold-off aggressively in the past few sessions. The EUR rose 0.3 percent from late U.S. trade on Wednesday to $1.4227 The AUD was up 0.2 percent at 0.8352, having fallen as low as 0.8180 on Wednesday, while the kiwi advanced 0.2 percent on the day to 0.6730 up from Wednesday's trough of 0.6599. The U.S. currency's upside against the yen seems to be capped due to talk of dollar-selling by Japanese investors repatriating funds related to $27 billion in coupon payments on U.S. Treasuries due on Aug.15. In addition, $61 billion in coupon securities mature on the same day. Europe is busy today. The contraction in Euro Area GDP probably continued in 2Q, but at a much slower pace than in the prior 2 quarters. Supported by “scrapping bonuses” in several member states, private consumption probably increased in 2Q. But the impact on overall GDP probably was offset by a further fall in inventories. Capital expenditure probably continued to fall in 2Q while the contribution of net exports to GDP likely was neutral, after a large negative contribution in Q1.