The US dollar edged slightly lower against the euro on Wednesday, as fresh economic data in the United States painted a mixed image of the economy a single day ahead of gross domestic product data. An index of the US dollarâs strength against a basket of major currencies posted a bigger loss today amid broader declines versus the British pound and the Canadian dollar.
Todayâs first important economic release briefly supported the US dollar higher. The US Census Bureau said that the gap between imports and exports of goods shrank $1.24 billion to $65.90 billion in May from $67.14 billion in April, which was a bigger drop than the $0.94 drop that analysts had anticipated. Exports of goods increased $0.5 billion to $127.1 billion last month, while imports declined $0.8 billion to $193.0 billion.
A smaller trade deficit represents a direct boost to gross domestic product, for which the Bureau of Economic Analysis will release tomorrow a new and final reading of its level in the first quarter of 2017. Next week, the US Census Bureau will release overall trade balance data, which also includes services. However, the size of the trade gap is more closely tied to changes in exports and imports of goods as services rarely change much from one month to another.
The greenback turned south following disappointing housing data this afternoon. The National Association of Realtors released a report that stated that pending home sales declined 0.8% in May from April, despite expectations of a 0.8% gain. The report added to mounting evidence that the housing market is facing headwinds, which the realtorsâ trade group attributed to uneven progress between supply and demand.
National Association of Realtorsâ chief economist Lawrence Yun said in the release that limited offering choices and rapidly climbing home prices are sidelining prospective buyers. Yun believes that this will force the growth of existing home sales to decelerate to 3.2% in 2017 from 3.8% in 2016.
The US dollar tumbled harder against the British pound today in the wake of bullish remarks from Bank of England Governor Mark Carney, who surprised investors by signaling that the UK economy may be ready for higher interest rates.
The comments greatly differed from Carneyâs stance two weeks ago, when he said that it was not yet the time to start raising interest rates after voting for keeping them unchanged in the latest monetary policy meeting.
EUR/USD traded at 1.1378 as of 18:50 GMT on Wednesday, after briefly dipping to 1.1291 at 12:15 GMT. EUR/USD spent most of the day in a range between 1.1341, its starting level today, and 1.1382.
GBP/USD surged to 1.2934, after reaching 1.2968 at 14:40 GMT, the pairâs highest level since June 8. GBP/USD began trading today at 1.2814. USD/CAD declined to 1.3031 from 1.3172 when the day started.
The Dollar Index, which tracks the strength of the US currency against a basket of major peers, dropped to 96.02 as of 18:42 GMT today from 96.39 yesterday.
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