The Euro and The USD Slug It Out
The euro dropped to a one-week low against the dollar in unsettled trading on Thursday as U.S. Business information showed the recovery lost steam early on in the year but stayed in fitter shape than the euro section. U.S. Producing cooled in Feb and consumer expenditure was flat in Jan for a 3rd straight month. Other info, though, showed new claims for unwaged benefits slid to a near four-year low last week while reports from shops and automakers on Feb sales were also hopeful. Prospects for a sustained commercial recovery around the world nonetheless, darkened as sputtering factory activity in Europe eclipsed more positive info from The East. The euro had already been puny before Long Island opened after a big injection of money by the EU Central Bank on Wed. and lingering worries about debt and the frail eurozone economy. The euro was last down 0.1 p.c to $1.3312 after touching an one-week low of $1.3280, breaking near-term support at its 100-day straightforward moving average of $1.3293.
The euro hit a three-month high of $1.3485 on Wed., according to Reuter’s info. The euro also posted its best monthly performance in Feb since October. The euro is in a consolidation phase after a position squeezing that started last week this consolidation should leave the euro about $1.3250 by Friday’s close. Affidavit from Fed Boss Ben Bernanke to a Senate panel was closely studied but had nominal impact.
Repeating Wednesday’s prepared remarks, the Federal Agency head honcho warned the contemporary steep drop in the U.S. Rate of unemployment wasn’t likely to continue given a still-soft economy, but he stopped before signaling another easing of financial policy. Another round of asset purchases, or quantitative easing, would be negative for the dollar as it is equivalent to printing money. That contrasts strongly with the ECB’s latest money infusion thru its Long Term Refinancing Operation. Stocks are higher, although not the euro, one can disagree the market could be translating the LTRO as a sort of QE and we receive a hint of that in today’s trading.
The market is beginning to realize that QE3 is off the table, though Bernanke still has a wary tone. “Bernanke is a touch more dovish than yesterday, highlighting worries about economic responsibility and therefore the debt situation is unsustainable.” was asserted by one or two economic experts
Attention on Thursday also turned to a European Union Summit and a meeting of euro-zone finance officers among debate of Greece’s progress on meeting the particulars of its latest rescue. Traders reported early euro selling by Asian central banking organizations and macro funds, with several cutting euro positions as the ECB’s injection of 530 billion euro in three-year funds had been broadly priced in.
Morgan Stanley researchers were more optimistic on the euro’s current prospects, raising their end-March euro / usd outlook to $1.34 from $1.27 as the ECB funds eased banking and sovereign debt strains. They expect the euro to decline quickly by the year’s end nonetheless, though they now see it at $1.19 instead of $1.15.
Originally posted here
