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Unexpected growth for UK economy

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Pound Sterling

The Pound has hit a one-month high against the US Dollar after the latest UK consumer confidence report showed an unexpected 18-month high. The sentiment index rose to minus 22 for November, its strongest reading since May 2011, up from minus 30 in October. The surprise increase in sentiment caused demand for the Pound to rise and is a contrast to the Bank of England’s downbeat assessment for the UK economy.

A measure of Britains’ outlook for the economy over the next 12 months jumped 14 points to minus 15, while the outlook for their personal finances rose 6 points to minus 7. The climate for making major purchases increased 7 points to minus 26.

US Dollar

The ‘Greenback’ has weakened against the majority of its peers after optimism that a deal will be made in regards to the ‘fiscal cliff’. Demand for the safe-haven currency weakened as traders and investors drew more confident that the situation will be resolved by the end of the year.

Dollar traders should continue to keep an eye on any developments for the ‘fiscal cliff’ as any move in either direction will affect the strength of the Dollar. A speech by European Central Bank president Mario Draghi could also generate volatility. If his speech shows that the Eurozone situation has improved the Dollar is sure to weaken further.

The Euro

The Euro has made gains against its safe-haven rivals due to the release of a set of strong US economic data which boosted optimism and led to demand for riskier assets. As a result the single currency breached the significant 1.3000 level. A number of Euro-zone news events and data releases could create market volatility before the markets close for the weekend. ECB President Mario Draghi is set to make a speech on the Eurozone situation and the latest unemployment figures could lead to weakening.

Australian Dollar

The ‘Aussie’ has declined against the majority of its peers as speculation mounts that the nation’s Central Bank is planning to lower interest rates next week in an attempt to protect the economy from the slowdown in the mining industry. Against the New Zealand Dollar the ‘Aussie’ slumped to a three-week low.

New Zealand Dollar

The ‘Kiwi’ is slightly down against most of its peers but hit a three-week high against its Australian counterpart. The New Zealand Reserve Bank is due to publish its own interest rate decision next Thursday along with the Bank’s expectations for the year ahead. A negative forecast will almost certainly weaken the currency.

Canadian Dollar

The ‘Loonie’ has been trading in an up-and-down pattern over the past few days due to the varying assessments of the US ‘fiscal cliff’ negotiations. One day traders are optimistic over the outcome, the other they are doubtful. Better-than-expected trade data generated some support for the currency.

South African Rand

The Rand has declined due to concerns that the nation’s Gold industry is on the verge of collapse. Declining output due to the recent miners strikes and the soaring cost of extraction has seen the amount of production in South Africa half over the past seven years. The Rand could see some support from increasing optimism regarding the US ‘fiscal cliff’ negotiations.