Dollar weakness continues as we head into the weekend. EUR/USD hit an eight-month high just shy of 1.3704, which is presenting some resistance. A break above 1.3712 would mark a 2013 high for the EUR and likely spur more short-term upside momentum as buy-stop orders are triggered. The 17-member single currency would probably have to climb even higher hurdles before Draghi and his fellow policy cohorts at the ECB raises any concerns. The market has yet to hear from the Euro exporting sector – they will be the first to feel the pinch in a fragile euro economy.
The strength of the EUR is not directly related to the currency itself, but because of the general malaise of the “mighty” dollar. The likelihood that the Fed, and in particular the new Fed head, will extend its expansionary monetary policy has caused the dollar to take a “swan” dive now that US government partial shutdown and debt ceiling has been seen to, at least for the time being.
Since Wednesday the dollar has been weakening across the board: recording a -1.5% loss against sterling, and a four-month low against the Antipodean pairs. But it will probably be the eight-month low against the EUR that will garner most of the markets attention given the regions sensitivity to currency strength. Do not be surprised to hear a few Euro politicians crying foul at next weeks Ecofin meeting. The Eurozone’s economy grew +0.3% in Q2 after 18-consecutive months of contraction. When the EUR was at 1.3500 Draghi’s said that the “exchange rate was not a policy target.” However, do not expect that to be the case when if the single currency is forced much on no fault of its own.
- BoE Paul Tucker Issues Dark Pool and Shadow Bank Warning –
- Canada and Europe Sign Trade Deal –
- BoE Chief Economist: Interest Rates may rise in 2014 –
- ECB Preparing to Assess Europe’s Banks –
- Ireland Eases Off Austerity Despite Warnings –
- UK Positions London as Chinese Trading Hub –
- UK Inflation at 2.7 Percent in September –
- BOE’s Cunliffe: U.K. Housing just Rising from Low Levels –
- Central Banks Preparing for the Worst –
- IMF Says Central Banks Should be Independent With Banking Oversight –
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