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Daily U.S. Forex Summary

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The US dollar traded stronger against a basket of currencies after the ECB

Fri, Dec 5 2008, 09:01 GMT
by Union Bank of California Team

Union Bank of California

The US dollar traded stronger against a basket of currencies after the ECB, and BOE cut rates this morning. In economic news, the number of US jobless claims unexpectedly fell last week according to a government report. In contrast the four week average jobless claim reading rose to its highest level since 1982.

The euro initially fell against the dollar prior to the ECB announcement but rallied back after the cut. The 0.75% rate reduction was the largest interest rate cut in the Eurozone’s 10 year history. The ECB President stated that 2009 growth projections had been lowered. In France, a 26 billion EUR stimulus package is expected boost French growth by 0.6% next year but at the expense of increasing the deficit by 3.9%.

The British pound fell to 6 ½ year lows against the dollar after the BOE cut rates 1 full percentage point to 2% as expected. This marks the lowest interest rate level in the UK since 1951. In a statement following the announcement, the BOE noted that credit conditions remain tight and it is unlikely that a normal volume of lending would be restored without further measures.

The Japanese yen continues to gain against the dollar despite surveys showed that the economy contracted more than initially expected in the third quarter.
Investors expect the world’s second largest economy will remain in a recession till the Q2 2009 as exports will likely decline due the global economic slowdown.

The Canadian dollar continued to weaken oil trades near 4 year lows and the Prime Minister tries to save his 7 week old government. The loonie fell almost 1.2% as crude oil fell 3.2%. Some market participants are now calling for $25/barrel by next year. Investors are preparing for a 50 basis point cut December 9th.

Both the Australian dollar and New Zealand dollar strengthened on a 2 day equity rally despite New Zealand’s central bank slashed rates by 1.50% to 5%, as expected to a 5 year low.

The Mexican peso traded slightly stronger as investors are starting to see some stability in the US.

Published on  Fri, Dec 5 2008, 12:24 GMT