The U.S. dollar managed a recovery pushing higher after mixed data released sighting faster U.S. economic growth, but a slight dip in new home sales in October. Gross domestic product expanded at a 2.2 percent annual rate for the third quarter, higher than the 1.6 percent gain first estimated, while new home sales in October came in at one thousand and four slightly below market expectations. Also supporting the greenback was yesterday’s comments from U.S. Federal Chairman Ben Bernanke where he stated that risks remain to the upside, helping to support the argument that an interest rate cut is not needed next year to boost the U.S. economy.
The euro weakened against its U.S. counterpart after French Finance Minister Thierry Breton stated that strong movements in currencies are never good, reiterating his call for continued vigilance. The market will look towards European Central Bank President Jean-Claude Trichet who will be speaking in London today for further insight into the euro’s eleven percent gain seen this year.
The Japanese yen weakened against the U.S. dollar and managed a recovery against the euro after a report released showing Japan's industrial production unexpectedly rose in October. Factory output gained 1.6 percent from a month ago to a record, compared with expectations for a 0.4 percent decline. After the data released BOJ Governor Toshihiko Fukui said policy makers need to ensure economic growth is stable. The data is prompting some investors to start to price in a rate hike from the Bank of Japan in early Q1 of next year.
After reaching a two year high against the U.S. dollar, the British pound slid due to technical trading this morning. The UK’s currency, however, still remains within sight of a 14 year high and only five cents away from the key psychological level of two dollars. The market will look towards October consumer credit and mortgage data later today to further support the pound.
The Canadian dollar fell against the U.S. dollar after an unexpected rise in the domestic current account was ignored after the release of positive GDP figures out of the U.S. Canada's current account surplus rose to C$5.09 billion above expectations for a decline to C$3.45. The market will look towards third-quarter growth data due out tomorrow and November’s employment report due out on Friday for further direction in USD/CAD.
The Australian dollar rose to 20-month highs against the U.S. dollar, but then retreated slightly due to profit taking. Australia’s trade deficit released at A$1.263 billion ($987 million) for October. With the Reserve Bank of Australia (RBA) raising rates by 25 basis points to 6.25 percent earlier this month, look for the Aussie to remain well supported, potentially testing .80 by year end.
The Mexican peso strengthened today, reversing recent dollar gains seen in the currency pair. If USD/MXN can hold above 11.1220 than we could see continued dollar strength, however if it closes below that level the strong MXN trend could continue.
