Daily FX Commentary
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Daily FX Commentary
Fri, Oct 31 2008, 11:32 GMT
ECB looks for balance
The Euro was unable to sustain the advance on Thursday after rapid gains during the past 48 hours. The currency dipped to lows near 1.28 before consolidating near 1.2900 as currency markets continued to track stock-market moves.
The Euro-zone economic data had a generally weak tone with business confidence falling sharply to a 15-year low according to the latest EU Commission survey while consumers were also gloomy as German retail sales weakened for September.
ECB officials continued to suggest that interest rates could be reduced at the November council meeting even though there was some caution over the need to balance inflation and deflation prospects. The Euro was still unsettled to some extent by widening bond spreads between individual Euro-zone countries as these will spark some debate over the risk of a Euro-zone break up in the medium term.
The Euro retreated to 1.2700 on Friday with significant selling pressure on the crosses undermining the currency while overall confidence remained very fragile as Asian equity markets drifted weaker. There were interesting comments from ECB member Bini-Smaghi who stated that the dollar and yen advances against the Euro were a temporary feature while interest rates should not be cut too far.
Published on Fri, Oct 31 2008, 11:33 GMT
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Investica Ltd
http://www.investica.co.uk | tim.clayton@investica.co.uk
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Investica's market analysis is not investment advice and must not be taken as recommending particular market positions. Investica can take no responsibility for any actions taken by investors.Related reports
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