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Dollar strengthens on the back of bad EU data

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Pound Sterling

The Pound slumped to a nine-and-a-half month low against a broadly stronger Euro as continuing concerns over the UK’s economic growth weighed on the currency. Sterling also weakened against the US Dollar as investors chose the safe-haven currency over the Pound.

The next focus for Sterling investors is the consumer price index data due later today which is expected to show annual inflation holding at 2.7 percent. A higher-than-forecast reading could knock the Pound by further reducing UK consumer spending power.

US Dollar

The ‘Greenback’ has strengthened against most of its currency rivals due to the release of worse-than-expected industrial production data from the Eurozone. The disappointing data led to an increase in demand for the safe-haven Dollar.

Today, investors should pay attention to the latest Retail Sales and Core Retail sales data. If either of those indicators come in at their expected levels then the currency could extend its upward trend. Another piece of data to be aware of is the US PPI figure. If that figure comes in lower-than-expected then we can expect to see some volatility for the Dollar.

The Euro

The Euro has retreated slightly against its safe-haven rivals after hitting an eleven-month high against the US Dollar and a twenty-month high against the Japanese Yen. The weakening came after the release of disappointing EU industrial data.

A lack of Eurozone news scheduled for today means that any volatility the Euro sees is likely to come as a result of British and US news. A speech from Bank of England Governor Mervyn King due later this morning, could lead to risk taking in the marketplace, which would benefit the Euro if he signals any improvements in the British economy.

Australian Dollar

The ‘Aussie’ made gains against the US Dollar due to commodity prices rising to their highest levels in more-than-a-week. It then weakened after investors were left disappointed by a speech from US Federal Reserve Chairman Ben Bernanke. The markets had been hoping to hear more about the USA’s monetary easing and economic stimulus programmes. However, investors came away from the Federal Reserve chairman's remarks with little new information.

New Zealand Dollar

The ‘Kiwi’ strengthened against the US Dollar due to the small nation’s economy appearing to strengthen without setting off inflation rises. A quarterly survey of business opinion indicated that the economy surged in the December quarter and another strong report for the residential property market from the Real Estate Institute of New Zealand boosted confidence.

Canadian Dollar

The ‘Loonie’ recovered from an early slide against the US Dollar on Monday to end little changed as it struggled to find direction from mixed market signals. Against the Euro the currency slipped to a two-week low.

South African Rand

The Rand weakened for a sixth day in-a-row due to South Africa’s largest producer of Platinum saying that it will cut output and cut worker shifts. The news fuelled concerns that South Africa’s trade deficit will worsen as a result. Anglo Platinum said today it will shut four shafts, cutting output by 400,000 ounces and putting 14,000 jobs at risk.

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