The week was full of upbeat data from the Eurozone. German factory orders soared 3.8% in June compared to May, the most in eight months, while industrial production posted a 2.4% monthly jump, signalling that growth in the currency bloc's largest economy accelerated in the last quarter. Meanwhile, retail sales in the Eurozone dropped less than expected in June after soaring 1.1% in May. Adding to signs that the region's economy is paving the way towards recovery, a preliminary reading of Italia's GDP indicated that the third largest economy of the Eurozone shrunk 0.2% in the second quarter versus a forecast of a 0.4% contraction.
On the other side of the Atlantics, the U.S. Dollar lost ground against the Yen, declining more than 2% despite some positive economic data. On Monday, the Institute of Supply Management reported its non-manufacturing index jumped to 56 in July from 52.2 in June, while experts called for an increase to 53.1. Signs of sustainable economic recovery also were reflected in raising concerns that the Fed will taper its stimulus programme soon. Federal Reserve Bank of Chicago President Charles Evans, one of the most vocal proponents of loose policies, said there are already signs of improvement in the labour market, suggesting that a tapering of Fed's third round of quantitative easing in September is possible.
The Japanese Yen gained momentum after the Bank of Japan refrained from adding to its record monetary stimulus package, leaving its monetary base unchanged between 60 and 70 trillion yen, as the world's third biggest economy is reviving. In the meantime, current account surplus shrank 20.3%, as import costs climbed sharply on weaker Yen offsetting gains in exports. Despite signs of economic progress, consumer mood deteriorated for the second consecutive month in July.
Statistical bureaus in Australia and New Zealand also were busy releasing economic data. Australian figures disappointed investors as trade surplus and number of Australians having a job came worse than expected. The Reserve Bank of Australia cut its benchmark interest rate for the second time this year amid worsening economic outlook. The rate was cut by 25 basis points to 4.5%. However, the Australian Dollar responded to a rate cut by strong gains versus the U.S. Dollar, as investors considered that further easing is unlikely and as China's data surpassed estimates.
The New Zealand Dollar followed the trend of its neighbouring country's currency, soaring 2.58% against the greenback in the week ending August 5 after a release of labour market data. Jobless rate increased to 6.4% in the second quarter compared to the first quarter's reading of 6.2% and expectations of an increase to 6.3%. At the same time, the number of people in the labour force climbed on a yearly basis, while wages also rose slightly.
This week market players are likely to be looking at Japanese preliminary GDP, U.S. retail sales, preliminary GDP readings from Germany and France, U.K. jobs market data and retail sales, U.S. CPI and Philly Fed manufacturing index, U.S. consumer sentiment and building permits.