US currency strengthens on forex risk taking
The dollar ended the week on a good run, helped by some recovery in overall risk appetites, which saw the euro dropping below the 1.47 usd for the first time in 10 days.
Rises in equity prices, with Wall Street well inside positive territory, helped boost the dollar alongside month end book squaring activities, even though the afternoon's US data was at best mixed. For one, US personal income and spending data rose more slowly than expected, suggesting that consumer spending may cool off quickly.
At the same time, however, there was more evidence of rising inflationary pressures, with the personal consumption expenditure (PCE) index growing to its highest level this year due to rises in food and energy costs
US rate cuts are expected to keep the economy from slipping into a recession and are seen by some as a positive for the dollar just now. As risk aversion begins to dissipate, the yen and Swiss franc are coming under pressure with the reemergence of carry trades.
Speaking on Friday, Federal Reserve chairman Ben Bernanke signalled more openness to cutting rates again on December 11, although he stressed this would be dependent on upcoming data.
Fed policymakers will need to be exceptionally alert and flexible given the risks to consumer spending and the economy, Bernanke said in a speech overnight. Among Fridays other US data, the Chicago purchasing managers' index was stronger than expected, rising to 52.9 in November from 49.7 in October while US construction spending was weaker than predicted.
Separately, month end book squaring also went in favour of the greenback, especially as this is the financial year end for US investment banks
In Europe, the boost for the euro from strong inflation numbers faded slightly as the trading day wore on. The single currency rose after stronger-than-expected inflation figures continued to suggest that the European Central Bank will leave interest rates on hold for the foreseeable future.
The provisional estimate for the euro zone harmonised index of consumer prices showed inflation rose to an annual 3.0 % in November, up from 2.6 % in October and above forecasts for 2.9 %.
With the headline rate likely to head even higher over the coming months, the ECB will remain in a state of high alert for signs of a wider pick-up in price pressures. This was confirmed by ECB president Jean-Claude Trichet, as he reiterated that the central bank's prime concern is to tackle price stability.
Higher inflation will leave the ECB facing a dilemma, giving them little chance to cut interest rates to counteract a slowing economy. The risks to the economy were highlighted on Friday by woeful German retail sales figures, which revealed an unexpected slump in sales of 3.3 % in real terms during October.
Currency trading remains subdued and rangebound, however, with the euro making up little ground against the dollar after the US currency gained from a pick-up in risk appetite.
The Pound also lost ground to the dollar after a weaker-than-expected UK consumer confidence survey. Gfk/NOP said its monthly consumer confidence index fell to -10 from -8 in October, below analysts' expectations for -9 and the lowest reading since March 2003.
From the vantage of this particular survey, it would appear that the UK consumer is succumbing to the unfavourable headwinds emanating from both the financial and housing markets. The Bank of England's Monetary Policy Committee meets this week and analysts see some chance that they will opt to cut interest rates, though worries over inflationary pressures may well encourage them to hold off until early next year.
Prices at the London open
GBPUSD – 2.0621
GBPEUR – 1.4033
EURUSD – 1.4690
GBPJPY – 228.19
GBPCHF – 2.3212
GBPAUD – 2.3379
GBPCAD – 2.0580
GBPZAR – 13.9803
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.
Rises in equity prices, with Wall Street well inside positive territory, helped boost the dollar alongside month end book squaring activities, even though the afternoon's US data was at best mixed. For one, US personal income and spending data rose more slowly than expected, suggesting that consumer spending may cool off quickly.
At the same time, however, there was more evidence of rising inflationary pressures, with the personal consumption expenditure (PCE) index growing to its highest level this year due to rises in food and energy costs
US rate cuts are expected to keep the economy from slipping into a recession and are seen by some as a positive for the dollar just now. As risk aversion begins to dissipate, the yen and Swiss franc are coming under pressure with the reemergence of carry trades.
Speaking on Friday, Federal Reserve chairman Ben Bernanke signalled more openness to cutting rates again on December 11, although he stressed this would be dependent on upcoming data.
Fed policymakers will need to be exceptionally alert and flexible given the risks to consumer spending and the economy, Bernanke said in a speech overnight. Among Fridays other US data, the Chicago purchasing managers' index was stronger than expected, rising to 52.9 in November from 49.7 in October while US construction spending was weaker than predicted.
Separately, month end book squaring also went in favour of the greenback, especially as this is the financial year end for US investment banks
In Europe, the boost for the euro from strong inflation numbers faded slightly as the trading day wore on. The single currency rose after stronger-than-expected inflation figures continued to suggest that the European Central Bank will leave interest rates on hold for the foreseeable future.
The provisional estimate for the euro zone harmonised index of consumer prices showed inflation rose to an annual 3.0 % in November, up from 2.6 % in October and above forecasts for 2.9 %.
With the headline rate likely to head even higher over the coming months, the ECB will remain in a state of high alert for signs of a wider pick-up in price pressures. This was confirmed by ECB president Jean-Claude Trichet, as he reiterated that the central bank's prime concern is to tackle price stability.
Higher inflation will leave the ECB facing a dilemma, giving them little chance to cut interest rates to counteract a slowing economy. The risks to the economy were highlighted on Friday by woeful German retail sales figures, which revealed an unexpected slump in sales of 3.3 % in real terms during October.
Currency trading remains subdued and rangebound, however, with the euro making up little ground against the dollar after the US currency gained from a pick-up in risk appetite.
The Pound also lost ground to the dollar after a weaker-than-expected UK consumer confidence survey. Gfk/NOP said its monthly consumer confidence index fell to -10 from -8 in October, below analysts' expectations for -9 and the lowest reading since March 2003.
From the vantage of this particular survey, it would appear that the UK consumer is succumbing to the unfavourable headwinds emanating from both the financial and housing markets. The Bank of England's Monetary Policy Committee meets this week and analysts see some chance that they will opt to cut interest rates, though worries over inflationary pressures may well encourage them to hold off until early next year.
Prices at the London open
GBPUSD – 2.0621
GBPEUR – 1.4033
EURUSD – 1.4690
GBPJPY – 228.19
GBPCHF – 2.3212
GBPAUD – 2.3379
GBPCAD – 2.0580
GBPZAR – 13.9803
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: Bank of England, currency converter, US Dollar
posted by Wise Money @ 10:32 AM
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