Weak US economic data and a warning from the Feds chairman Ben Bernanke that few small US banks could fail increased expectations for further interest rate cuts suggesting a US recession all point to yields falling further. Today may bring more illness for recession watchers, with EU inflation, US personal consumption figures and Michigan consumer sentiment in the picture.
Meanwhile, European Central Bank President Trichet stated that the Euro Zone still has much action to apply in making the EU economy more flexible. The dollar continues to drop against the euro amid gloomier US economic data and the downbeat comments on the economic outlook given by Mr. Bernanke. This serious of events spurred the EUR/USD pair to the upside to record a high of 1.5239 and a low of 1.5165. While this is the situation in hand, one must acknowledge that it is unlikely to see the 1.45 level mark until one of two things happen; clear signs that the US economy is reviving or clear signs that the ECB is prepared to take action towards cutting in rates. At this point both seem out of the question.
Elsewhere, the pound is considered the lucky charm as the incline in the currency revolves around a weak dollar. Analysts suggest that the pound's gains could prove short lived as the BOE also set to cut in rates with ongoing worries about the health of the British economy and its financial sector suggesting that sterling was unlikely to benefit from the dollar's weakness for long. As for now, the royal pound continues to rally against the dollar pushing the pair with it to record at this hour a high of 1.9923 and a low of 1.9856.
The dollar dropped low against the Yen today amid renewed worries about the US economy, shocking stock markets, bolstering bonds and helping drive up prices of safe haven gold and oil to all time highs. The pair was influenced by the drop in the greenback dragging it to the downside to record a low of 104.31 after recording a high of 105.01.
The story is we are facing a situation where we have an everlasting slowdown in the economy, stress in the financial markets and inflation pressure arising from high commodity prices. The dollar remains under pressure amid of the Feds decision to cut rates aggressively while major foreign central banks continue to resist the cut.
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