Forexpros – The dollar fell in early afternoon U.S. trading Friday as markets digested with cautious approval growing European commitment to running tighter fiscal ships and bolstering recue funds.
In Europe on Friday, 17 eurozone countries and nine nations who want to join began signing a pact to bolster fiscal discipline across the continent.
The continent’s leaders also agreed to earmark 200 billion euros to the International Monetary Fund to help firewall the crisis, which has spread to from smaller economies like Greece to bigger ones like Italy and Spain, even threatening France and Germany.
Furthermore, the continent will be able to tap a 500 billion euro European Stability Mechanism next year, which will aid troubled countries alongside an existing but temporary 440 billion euro European Financial Stability Facility, thus serving as another shot in the arm to European economy.
During early afternoon trading Friday, the greenback was down against the euro, with EUR/USD rising 0.29% to hit 1.3379.
The greenback was also down against the pound, with GBP/USD rising 0.16% to hit 1.5654.
The United Kingdom was the only nation to oppose the European treaty, claiming it would impose taxes on its all-important financial sector although British officials have said they remain committed to the euro’s health, considering the amount of trade that runs between the island nation and the continent.
Washington, meanwhile, reported that the country’s trade deficit narrowed more than expected in October.
The Bureau of Economic Analysis said the U.S. trade deficit hit a seasonally adjusted $43.5 billion in October compared with a revised $44.2 billion in September.
The deficit fell in line with market forecasts, although the September revision was a little higher than expected.
Also in the United States, University of Michigan consumer sentiment index rose more-than-expected in November.
The university said that consumer sentiment rose to a seasonally adjusted 67.7, from 64.1 in the preceding month.
In the United Kingdom, the government reported a trade deficit of 7.5 billion pounds, much lower than a forecast for a 9.5 billion pound trade gap.
U.K. producer price inflation input rose to a seasonally adjusted 0.1% last month from -0.8% in the preceding month.
In Asia, China reported that consumer price index came in at 4.2% in November, below consensus of 4.6% and well below October’s 5.5% rate.
The data showed that inflationary pressure in China may be cooling.
Meanwhile, the greenback down against the yen, with USD/JPY was trading at 77.61, down 0.03%, and also down against the franc, with USD/CHF trading down 0.09% at 0.9252.
The greenback was down against its currencies in Canada, Australia and New Zealand, with USD/CAD dropping 0.39% to hit 1.0192, AUD/USD advancing 0.30% to hit 1.0197 and NZD/USD gaining 0.03% to hit 0.7732.
The dollar index, which tracks the performance of the greenback versus a basket of six other major currencies, was down 0.21% at 78.72.
Looking ahead, all eyes will move from Europe to the U.S. Federal Reserve next week, where the Federal Open Market Committee will announce it latest decision on interest rates.
The Fed Funds rate currently stands at 0.25%, a very low and expansionary rate.
Talk of continuing loose monetary policies, including hints of a third round of quantitative easing – asset purchases from banks -, would weaken the U.S. currency.
Forexpros
