FX round-up: Euro and sterling continue to hold out against the dollar

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The main currency pairs were little moved on Thursday but the technical aspect for some of them may have weakened slightly.

Nevertheless, while some analysts continue to see scope for US dollar strength in the very near term, the other major international currency units continue to hold out.

That came as economic data on both sides of the Atlantic seemed to more or less come in as expected and thus cancel each other out.

Hence, the euro/dollar ended the session little changed at 1.3615.

Eurostat confirmed that the Eurozone’s consumer price index for the month of December rose at an 0.8% year-on-year rate of change, while at the core level it increased by 0.3%. The latest CPI figures Stateside were similarly well-behaved.

Of interest, European Central Bank Governing council member Christian Noyer and at least two other of his colleagues made rather dovish noises regarding the possibility of further monetary stimulus, should it be needed.

To take into account as well, writing in yesterday’s Financial Times on the solid prospects for commodity prices this year following on the back of two years of under-performance, James Paulsen, Chief Investment Strategist at Wells Capital Management, referenced indicators which suggest the velocity of money in the US may rise this year – for the first time in this recovery.

On the weaker side of things, the Federal Reserve bank of Philadelphia’s regional manufacturing gauge edged higher in January, to reach a reading of 9.4 (consensus: 8.7). However, Capital Economics pointed out: ‘The detail shows that while the employment index rebounded to +10.0, from +4.4, the new orders index dropped to +5.1, from +12.9, and the inventories index plunged to -19.6, from +16.0.’

Lastly, on Friday morning technical analysts at Commerzbank pointed out to clients the possibility of some weakness in Cable (GBP/USD) in the very near term.

‘Cable has recently severed the six-month up-trend, and we would like to see some further follow-through weakness today. This leaves the 1.6259 October high exposed. My intra-day charts are suggesting that the market may hold in this vicinity on the initial test. However a close below here would be enough to adopt a more aggressive negative stance and target the 1.5855 November low,’ they explained.

Sterling finished the day at 1.6347 versus the US dollar.


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