Weak dollar under pressure from US data
The US dollar stayed under pressure even after news of strong job creation in the world's biggest economy, with sentiment on the currency still depressed. During the course Friday, the dollar sank to yet another record low against the dollar, at 1.4525 usd.
Additionally, one US dollar is now worth only 0.9320 of the Canadian currency, a 47-year low. The Pound meanwhile, is steadily closing in 2.09 usd having set a series of 26-year highs.
There may be losses in equities this week amid fading hopes of another Fed rate cut in December alongside ongoing strains in the credit markets, potentially weak spending in the holiday season and the weakness apparent in the third-quarter earnings season.
If equities suffer steep falls, a drop in risk appetites may end up favouring the dollar as it is seen to some extent as a safe haven in times of greater volatility.
The dollar has been under sustained pressure ever since the troubles in the US sub-prime mortgage market emerged. The Federal Reserve's response has been to lower interest rates, first by a half-point reduction in August and last week, a quarter-point cut, taking the base rate to 4.50 % in order to shore up the economy. Now though it is starting to look like the Fed will stop there.
In the meantime, the fallout from the sub-prime market has continued, with the Fed forced to pump another 41 bln usd into money markets on Thursday, its largest injection since the 50 bln it made after the September 2001 terrorist attacks on New York and Washington, prompting fears that the world's banking sector may be into further multi-billion dollar writedowns.
Those concerns were accentuated by the news that Citigroup may be forced to slash its dividend to meet its capital ratio requirements.
Against this backdrop, Friday’s US jobs data, though keenly awaited, only managed to lift the dollar very briefly.
It was revealed that the US economy added 166,000 jobs in October, nearly double the 85,000 jobs the Markets had forecast. The unemployment rate, taken from a separate survey of households, held steady at 4.7 % in October.
The report confirms the need for a Fed rate hold. Despite higher gas prices and falling home prices, consumers will remain firm with the strong employment market coming into the fourth quarter. The strong report suggests the labour market is still holding up despite the recent credit crunch. We still expect to see more signs of weakness in the coming months, but those signs might not arrive in time for a December rate cut, we think January is still marginally the more likely time.
Prices at the London open
GBPUSD – 2.0868
GBPEUR – 1.4405
EURUSD – 1.4481
GBPJPY – 239.05
GBPCHF – 2.4064
GBPAUD – 2.2656
GBPCAD – 1.9493
GBPZAR – 13.4263
Have a great day!
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.
Additionally, one US dollar is now worth only 0.9320 of the Canadian currency, a 47-year low. The Pound meanwhile, is steadily closing in 2.09 usd having set a series of 26-year highs.
There may be losses in equities this week amid fading hopes of another Fed rate cut in December alongside ongoing strains in the credit markets, potentially weak spending in the holiday season and the weakness apparent in the third-quarter earnings season.
If equities suffer steep falls, a drop in risk appetites may end up favouring the dollar as it is seen to some extent as a safe haven in times of greater volatility.
The dollar has been under sustained pressure ever since the troubles in the US sub-prime mortgage market emerged. The Federal Reserve's response has been to lower interest rates, first by a half-point reduction in August and last week, a quarter-point cut, taking the base rate to 4.50 % in order to shore up the economy. Now though it is starting to look like the Fed will stop there.
In the meantime, the fallout from the sub-prime market has continued, with the Fed forced to pump another 41 bln usd into money markets on Thursday, its largest injection since the 50 bln it made after the September 2001 terrorist attacks on New York and Washington, prompting fears that the world's banking sector may be into further multi-billion dollar writedowns.
Those concerns were accentuated by the news that Citigroup may be forced to slash its dividend to meet its capital ratio requirements.
Against this backdrop, Friday’s US jobs data, though keenly awaited, only managed to lift the dollar very briefly.
It was revealed that the US economy added 166,000 jobs in October, nearly double the 85,000 jobs the Markets had forecast. The unemployment rate, taken from a separate survey of households, held steady at 4.7 % in October.
The report confirms the need for a Fed rate hold. Despite higher gas prices and falling home prices, consumers will remain firm with the strong employment market coming into the fourth quarter. The strong report suggests the labour market is still holding up despite the recent credit crunch. We still expect to see more signs of weakness in the coming months, but those signs might not arrive in time for a December rate cut, we think January is still marginally the more likely time.
Prices at the London open
GBPUSD – 2.0868
GBPEUR – 1.4405
EURUSD – 1.4481
GBPJPY – 239.05
GBPCHF – 2.4064
GBPAUD – 2.2656
GBPCAD – 1.9493
GBPZAR – 13.4263
Have a great day!
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: currency converter, Weak Dollar, wise money
posted by Wise Money @ 9:06 AM
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