European Session – Dollar firmer after strong US personal spending rises
January 31, 2014 2:55 pm
Risk aversion dominated the currency markets on the last day of the month, causing volatility and buoying the safe haven yen, while the dollar was stronger against the euro and the pound. Month-end repositioning also played a role in directing currency flows.
The euro had a rough week, falling down to 2-month lows after extending losses today on soft Eurozone inflation data. January’s headline number showed a surprise drop to 0.7 % year-on-year, debunking forecasts for a rise to 0.9%. This fuelled fears that the European Central Bank may need to resort to easing policy in order to fight deflationary pressures. Adding to negative sentiment to the euro was weak German retail sales.
On a more positive note for the euro, the Eurozone unemployment report showed the jobless rate remained unchanged at 12% in January from December.
The euro briefly broke below the key 1.3500 support level before ending the session with a 0.18% loss against the dollar at 1.3513.
Sterling dipped against the dollar to 1.6439 before rebounding to 1.6475, nearly flat on the session. There were no important UK data releases today that would have a direct impact on the pound so the dollar’s strength was mainly directing flows for cable.
The dollar was pushed lower against the stronger yen. Apart from safe haven flows, the Japanese currency was being supported after some upbeat Japanese inflation data today. This was positive for the yen because it reduces the need for the Bank of Japan to embark on additional policy easing, as it has done so in the past year to fight deflation.
The dollar ended the session at 102.25, down 0.21% against the yen.
The dollar’s slide against the yen was halted by strong US personal spending data today which shows consumer confidence remains buoyant. Consumer spending is the main engine of growth for the American economy and the strong numbers raise expectations that the Federal Reserve would continue with tapering. The Fed just this week announced another cut to its monthly bond-buying program.
Risk aversion dominated the currency markets on the last day of the month, causing volatility and buoying the safe haven yen, while the dollar was stronger against the euro and the pound. Month-end repositioning also played a role in directing currency flows.
The euro had a rough week, falling down to 2-month lows after extending losses today on soft Eurozone inflation data. January’s headline number showed a surprise drop to 0.7 % year-on-year, debunking forecasts for a rise to 0.9%. This fuelled fears that the European Central Bank may need to resort to easing policy in order to fight deflationary pressures. Adding to negative sentiment to the euro was weak German retail sales.
On a more positive note for the euro, the Eurozone unemployment report showed the jobless rate remained unchanged at 12% in January from December.
The euro briefly broke below the key 1.3500 support level before ending the session with a 0.18% loss against the dollar at 1.3513.
Sterling dipped against the dollar to 1.6439 before rebounding to 1.6475, nearly flat on the session. There were no important UK data releases today that would have a direct impact on the pound so the dollar’s strength was mainly directing flows for cable.
The dollar was pushed lower against the stronger yen. Apart from safe haven flows, the Japanese currency was being supported after some upbeat Japanese inflation data today. This was positive for the yen because it reduces the need for the Bank of Japan to embark on additional policy easing, as it has done so in the past year to fight deflation.
The dollar ended the session at 102.25, down 0.21% against the yen.
The dollar’s slide against the yen was halted by strong US personal spending data today which shows consumer confidence remains buoyant. Consumer spending is the main engine of growth for the American economy and the strong numbers raise expectations that the Federal Reserve would continue with tapering. The Fed just this week announced another cut to its monthly bond-buying program.
Related Posts: