The US dollar traded range bound across major currencies ahead of interest rate decisions from several countries this Thursday. In economic news, expectations of the Institute for Supply Management’s index of non-manufacturing businesses fell to 42. If the estimates are accurate, it will be the lowest reading since 1997.
Productivity rose 1.3% in Q3, more than expected and labor costs rose less than expected at 2.8%.
The euro weakened against the dollar after a worse than expected retail sales reading at 2.1% in October from a year earlier. Expectations were for a 1.5% fall.
Weak consumer demand further emphasizes the need for the ECB to cut rates, The consensus is for a 50 point cut, but many market participants are now calling for a 75 basis point cut to battle the slowing economy.
The British pound fell to its lowest level in nearly 13 years. In economic news, the UK services sector fell to its lowest level since 1996. Combining yesterday’s bleak construction and PMI readings, this will give fuel for the BOE to cut rates by 1 full percentage point Thursday to 2%.
The Japanese yen gained against the dollar as investors pared back their exposure to higher yielding assets. The low yielding yen is trading near a 5 week high as equity markets around the world continue to decline.
The Canadian dollar continued to weaken as stock markets fall, oil trades near $47/barrel, and political instability may cause a change in parliament.
Investors are preparing for a 50 basis point cut December 9th.
The Australian dollar hovered near its one week low after a report showed the country grew at its slowest pace in 8 years. GDP grew 0.1% Q3 2008 versus 4.0% Q3 2007, a drastic change as deteriorating global domestic conditions continue to hurt the economy. The New Zealand dollar weakened slightly after a report that the New Zealand commodity prices fell for the 4th consecutive month. If not for the weakened kiwi dollar acting as a buffer, exports may have fallen more than 13% last month.
The Mexican peso pared gains after GM posted poor November sales. The local automobile industry is closely tied to the Detroit.
