The U.S. dollar fell slightly against its major rivals overnight, while trading flat against the Euro, as another bout of risk assumption weighed on the greenback. European and Asian equities rose after both the Bank of England and European Central bank held interest rates near their all-time low. The dollar also traded near its lows against commodity based currencies as the price of Gold touched new all-time highs in overnight trading. With U.S. equities pointed to a higher open, the dollar could remain under pressure during our trading session. This morning saw the release of strong economic data as Non-farm productivity surged in the third quarter at the fastest pace in six years. Both Initial and Continuing jobless claims also registered better than expected and the data is likely to encourage an improved outlook for the labor market ahead of the Non-Farm Payrolls report due out on Friday. As the dollar’s correlation to risk remains strong, the greenback has weakened during early morning trading.
The Euro was largely unchanged against the dollar following the European Central Bank’s decision to leave interest rates at a record low of one percent. Later this morning, ECB President Jean-Claude Trichet will speak at a news conference and comments from the central bank head is likely to move the currency market as investors weigh the outlook for future policy. Meanwhile, retail spending in the Euro-Zone unexpectedly slipped 0.7% in September to mark the 16th consecutive monthly decline, with the annualized rate tumbling 3.6% from the previous year amid expectations for a 2.4% drop. The data suggests that households may continue to curb their rate of consumption over the coming months as they face a weakening labor market paired with tightening credit conditions.
The Japanese yen fell across the board, while gaining slightly against the dollar as investors increased their appetite for riskier assets. Global stocks advanced as both the European Central Bank and Bank of England held improved outlooks for their economies. With U.S. equities pointed to a higher open paired with strong economic data released in the U.S., the safe haven currency will likely continue to be under pressure.
The pound rose against the dollar overnight after the Bank of England’s interest rate decision. As expected, the BoE held interest rates unchanged, but increased its asset purchase program by less than economist forecast. The BoE increased its quantitative easing program from 175 billion to 200 billion pounds, amid expectations of a 225 billion addition. The central bank also held an improved outlook for the future growth and said that the rebound in economic activity will soon become evident, and went onto say that bank funding conditions have picked up following the unprecedented steps taken by the government. Meanwhile, the economic docket showed industrial outputs in the U.K. increased 1.6% in September amid expectations for a 1.2% rise. Manufacturing also jumped 1.7% during the same period to top forecasts for a 1.0% expansion. The data reinforces the improved outlook held by the BoE, buoying the sterling.
