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  Daily Economic News – July 25, 2014


AUTHORS                 Derek Chen (x-81602)                      Eung Ju Kim (x-85804)
                        Gerard Kambou (x-32386)



Brazil real extends losses on turmoil in Middle East and Ukraine…U.S.
durable goods orders rise more-than-expected in June…Mexico’s trade
surplus declines


Financial Markets

The U.S. dollar extended gains, rising to a fresh 8-month high against the euro on Friday as durable
goods orders rose more-than-expected and a gauge of German business confidence fell more than
economists’ forecast hurt by geo-political tensions. The dollar rose 0.2% to $1.3433 per euro after
advancing to $1.3428 the strongest since November 21.

Brazil’s real fell for a third consecutive day as the intensifying conflict in the Gaza Strip and geopolitical
tensions in Ukraine over the downing of a Malaysian Airlines jetliner drove the demand for emergency-
market assets down. The real fell 0.2% to 2.2263 in mid-morning trading in Sao Paulo. Swap rates, a
measure of interest rate expectations, declined 5 basis points to 11.04% on the contract maturing in
January 2016 after moving up 10 basis points since July 18.


High Income Economies

U.S.’s durable goods orders rose by 0.7% in June, exceeding economists ’ forecast for a rise of 0.5%,
after dropping 1.0% in May. Excluding orders for transportation equipment, durable goods orders rose
0.8% rebounding from a 0.1% drop in May. Non-defense capital goods orders excluding aircrafts, a
measure of business spending, rose 1.4% after declining 1.2% in May, outpacing economists ’
expectations for an increase of only 0.5%.

Preliminary data showed that U.K.’s GDP grew by 0.8% (q/q) in the second quarter of 2014, the same as
in the first quarter, which meant than total economic output was 0.2% bigger than its previous peak in the
first quarter of 2008. GDP growth in the second quarter was driven by the services sector, which grew
1.0% (q/q) following a 0.8% increase in Q1. Manufacturing grew by just 0.2%, its weakest growth in more

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than a year while construction shrank by 0.5%. Year-on-year, GDP grew by 3.1% in the second quarter,
its fastest pace since the last quarter of 2007, up from a 3.0% expansion in Q1.
                           th
 At its meeting of July 25 2014, Russia’s central bank hiked the benchmark one-week repo rate by 50
basis points to 8.0%, citing an increase in inflation risks due in part to geopolitical tensions. The decision
aimed at slowing consumer price inflation to 6.0-6.5% in 2014 and to the medium-term target level of 4%.


Developing Economies

Mexico’s trade surplus fell to US$423.7 million (y/y) in June from US$920.1 last year as imports grew
faster than exports. Year-on-year, exports grew 7.7% in June following a 4.7% increase in May, its
biggest gain since October 2012. Imports rose 9.6% (y/y), accelerating from a 2.8% (y/y) gain in May. On
a monthly basis, exports fell by a seasonally adjusted 0.04% while imports declined 0.36% resulting in a
seasonally adjusted trade deficit of US$404 million, down from US$511 million in May. In the first six
months of 2014, Mexico’s trade balance posted a deficit of US$249.2 million, as exports grew 4.2% (y/y)
and imports rose 3.2% (y/y).

Turkey’s trade deficit narrowed to US$7.85bn (y/y) in June down from US$8.61bn in June of last year,
less than economists’ forecast for a deficit of US$7.0bn. Year-on-year, imports fell 1.3% much less than
the 10.2% (y/y) decline recorded in the previous month. Boosted by a surge in sales to the European
Union, exports grew 4.2% (y/y) following a 3.3% gain in May. On a monthly basis exports fell by a
seasonally and calendar adjusted 0.1% while imports declined 1.2%.



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