Euro strength worries currency conveters
The euro softened, particularly against the dollar, as euro area finance ministers met to discuss, among other topics, how to contain the strength of their common currency.
In the run-up to the Ecofin meeting, held yesterday and today, politicians have been vocal about the need to do something about the strength of the euro. Together, they will be drafting a policy stance to bring to the G7 meeting later this month, in an effort to make other currencies, the US dollar, most notably, to appreciate.
Euro zone finance ministers will be plotting a way to get the US to do more about the weak dollar. However, we believe this will come to nothing as long as the US remains intent upon having China stop intervening in foreign exchange markets. The most likely result, therefore, will only be more pressure on China.
The euro weakened yesterday after comments by Rodrigo de Rato, head of the International Monetary Fund, who said the dollar was undervalued. The currency also took a hit from weak data for German manufacturing orders.
These rose by a modest 1.2 % in August from July, below analysts' forecasts for a bigger 1.7 % increase to correct July's very disappointing 6.1 % decline. The figures echoed other indicators which show euro zone growth slowing down.
Elsewhere, the Pound remained rangebound against other major currencies after economic data yesterday morning showed input prices rose sharply for companies, although output prices remain subdued.
The figures failed to move markets much in anticipation of the Pre-Budget Report today. Markets are digesting the news that Prime Minister Gordon Stalinist Brown will not hold snap elections this autumn. The decision raises questions over what economic measures will be included in the Pre-Budget Report.
The US dollar recovered against the euro in afternoon trade in Asia today on growing speculation the Federal Reserve will refrain from cutting interest rates this month.
Rates maybe on hold until the end of this year as investors bet that September retail sales and other data coming out this week will support the view that the US economy won't plunge into a recession as earlier feared, right after the subprime mortage crisis erupted in August.
On Friday, investors cheered and gobbled up US stocks after an unexpectedly high jobs report for August and September. The US economy added 110,000 jobs in September, more than the 100,000 gain that most analysts have predicted. Revised figures for August also showed a gain of 89,000 jobs instead of an earlier estimated loss of 4,000.
The better-than-expected jobs data followed earlier reports that the manufacturing and services industries in the US continued their expansion last month. The dollar plunged to record lows against major currencies after the Fed's surprisingly deep 50 basis point rate cut on Sept 18.
The dollar fell to an all-time low of 1.4283 to the euro on Oct 1 as investors dumped dollar-denominated assets in favor of high-yielding currencies.
Finally, the Bank of Japan will meet this week and most analysts expect the policy makers to maintain its key rate at 0.5 %, the lowest among industrialised countries.
The contents of this blog are for information purposes only. It is not intended as a recommendation to trade or a solicitation for funds. The Wise Money Blog cannot be held responsible for any loss or damages arising from any action taken following consideration of this information.
In the run-up to the Ecofin meeting, held yesterday and today, politicians have been vocal about the need to do something about the strength of the euro. Together, they will be drafting a policy stance to bring to the G7 meeting later this month, in an effort to make other currencies, the US dollar, most notably, to appreciate.
Euro zone finance ministers will be plotting a way to get the US to do more about the weak dollar. However, we believe this will come to nothing as long as the US remains intent upon having China stop intervening in foreign exchange markets. The most likely result, therefore, will only be more pressure on China.
The euro weakened yesterday after comments by Rodrigo de Rato, head of the International Monetary Fund, who said the dollar was undervalued. The currency also took a hit from weak data for German manufacturing orders.
These rose by a modest 1.2 % in August from July, below analysts' forecasts for a bigger 1.7 % increase to correct July's very disappointing 6.1 % decline. The figures echoed other indicators which show euro zone growth slowing down.
Elsewhere, the Pound remained rangebound against other major currencies after economic data yesterday morning showed input prices rose sharply for companies, although output prices remain subdued.
The figures failed to move markets much in anticipation of the Pre-Budget Report today. Markets are digesting the news that Prime Minister Gordon Stalinist Brown will not hold snap elections this autumn. The decision raises questions over what economic measures will be included in the Pre-Budget Report.
The US dollar recovered against the euro in afternoon trade in Asia today on growing speculation the Federal Reserve will refrain from cutting interest rates this month.
Rates maybe on hold until the end of this year as investors bet that September retail sales and other data coming out this week will support the view that the US economy won't plunge into a recession as earlier feared, right after the subprime mortage crisis erupted in August.
On Friday, investors cheered and gobbled up US stocks after an unexpectedly high jobs report for August and September. The US economy added 110,000 jobs in September, more than the 100,000 gain that most analysts have predicted. Revised figures for August also showed a gain of 89,000 jobs instead of an earlier estimated loss of 4,000.
The better-than-expected jobs data followed earlier reports that the manufacturing and services industries in the US continued their expansion last month. The dollar plunged to record lows against major currencies after the Fed's surprisingly deep 50 basis point rate cut on Sept 18.
The dollar fell to an all-time low of 1.4283 to the euro on Oct 1 as investors dumped dollar-denominated assets in favor of high-yielding currencies.
Finally, the Bank of Japan will meet this week and most analysts expect the policy makers to maintain its key rate at 0.5 %, the lowest among industrialised countries.
The contents of this blog are for information purposes only. It is not intended as a recommendation to trade or a solicitation for funds. The Wise Money Blog cannot be held responsible for any loss or damages arising from any action taken following consideration of this information.
Labels: carry trade, euros, US Dollar
posted by Wise Money @ 3:42 PM
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