The Dollar Racks It Up Across the Board

The Euro (and most other major currencies) got slammed for the third day in a row versus the US dollar and is nearing the $1.4300 support-level at the time of this writing, from around $1.4535 at the beginning of the day, over a 1.5% drop. Today the EURUSD is on track for its biggest one-day tumble since July and a three and one half month low, the day after the highly anticipated FOMC meeting. The statement caused investors to become more optimistic about the U.S. economic outlook, highlighting job and retail sales data. The FED also stood by plans to exit most quantitative easing programs by February 1, 2010, which pleased dollar bulls, although it remained committed to keeping interest rates at record lows for an extended period. Moreover, continued worries about the financial situation in EZ member Greece, year-end profit-taking, and relatively thin trading did not help the euro. The Eurodollar is still trading above its 200-day moving average, a breach of which would be quite significant for technical analysts, especially in longer-term forecasting.

The economic data coming out of the US today was mixed. Weekly jobless claims came in higher-than-expected, but the manufacturing sector reported better-than-expected conditions. China's deputy governor said that dollar depreciation would continue and that it was getting harder for foreign governments to buy Treasuries as the U.S. current account deficit shrinks. However the dollar rally was unaffected by these comments.

CAD

The Loonie took a beating versus the USD today, due to broad dollar strength. Canada reported November CPI figures today, and they revealed that Canada's annual inflation rate was slightly higher than expected last month, mostly on increased gasoline prices, but analysts predicted that this would not cause the BOC to raise interest rates. The news did not have a significant impact on the CAD for the day. November was the second month in a row to record an increase in prices year-over-year. In each of the months from June to September, prices had fallen from the previous year. The BOC is promising to keep its key rate at 0.25 percent until June 2010 as long as inflation is kept in check. The bank last week kept rates unchanged, as expected, warning of significant fragilities in the global economy.

GBP

The Pound got pounded versus the dollar today, on broad USD strength and weak British retail sales data. Retail sales unexpectedly fell 0.3% in November, versus an expected 0.5% increase, and a 0.6% increase in October. However, the government said November's fall was mainly due to October's strong department store and clothing sales being a one-off deal. The GBP weakened almost a full cent after the data, hitting a two-month low against the dollar. The data raised more serious concerns about the pace of the UK economic recovery, especially for retailers during the critical Christmas period. The Bank of England has warned that the upturn is likely to get off to a slow and uneven start, and the central bank is expected to keep interest rates at their record low of 0.5 percent for most of 2010 to support the recovery. Nevertheless, most economists expect a return to modest growth by the end of the year in jolly old England.

Gold and Crude

Gold and crude oil dropped predictably today due to the sizeable dollar gains.

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