The US dollar weakened against a basket of currencies in response to recently released ADP jobs data announcing 693,000 job cuts in December 2008. This pushed the dollar back from earlier highs this week and indicates growing fear of a prolonged U.S. recession. After hitting a three week high against the Japanese yen yesterday, the U.S. currency has dropped to session lows down one percent
The euro surged against the USD today after falling to near 1-month lows on Tuesday. Despite such promising movement, a weakening economy and easing inflation signal a likely European Central Bank rate cut when it meets next week, leaving the euro susceptible to further declines. The current expectation is for the ECB will cut its key lending rate by 50 basis points or more.
The British pound climbed to fresh 3-week highs against the euro as the single currency is besieged by rate cut expectations. British house prices fell another 2.5% in December making 2008 the worst performing year on record. The BOE’s Monetary Policy Committee is expected to ease borrowing costs by at least 50 basis points to a historic low when they meet on Thursday.
After falling to 1-month lows against the dollar yesterday, the Japanese yen rebounded as dismal U.S. employment data increased the likelihood of a lingering U.S. recession.
The Canadian dollar fell against the USD today as oil and gold prices dropped.
Oil prices continue their downward trend, impacting the loonie as crude accounts for around 10% of Canada’s export revenue.
Both the Australian dollar and the New Zealand dollar remained stable against the USD and were supported by hopes that fresh stimulus plans from the United States and Germany would help the global economy recover. Higher commodity prices and high interest rate yields will keep the currencies well supported.
