Currencies fluctuated heavily during the Asian and European sessions affected by the downbeat gross domestic product from China, the rising inflation in the United Kingdom and the slump in confidence seen in the euro area and Germany, where the U.S. dollar benefited the most against other major currencies, especially against the euro and the sterling pound.
China released the gross domestic product for the third quarter, where over quarterly basis, the Chinese economy grew 2.3% at a slower pace than 2.4% a quarter earlier, while over annual basis, the economy grew 9.1% slower than the previous 9.5% and also below the expected expansion, which added more fears and jitters to the market that China could also follow the rest of major economies and could slow further in the coming period.
The U.S dollar benefited from the slowdown seen in China, where investors tended to avert risky investments during the session after they lost their risk appetite; however, the dollar gained more once U.K inflation climbed to 5.2%, especially after the sterling pound wasn't able to hold onto the gains recorded earlier today and gave them up which added more strength to the greenback.
The U.S. dollar index (USDIX) opened the session in Asia at 77.18, and recorded a high of 77.52 and a low of 76.94 and is currently hovering around 77.45.
Concerning the GBP/USD, the pair reversed sharply to the downside after the inflation index added to stagflation woes, where after reaching a high of 1.5821, the pair reversed to a low of 1.5695. The pair opened the session at 1.5745 and is trading now around 1.5725.
Moreover, the common currency, the euro, has also lost strength against the sterling pound and the U.S. dollar after the European confidence eased in October, especially after Merkel, the German Chancellor, provided discouraging comments yesterday regarding the October 23 summit and disappointed investors who are looking forward for the summit which was expected to provide a final plan to cure the debt crisis and to tackle the contagion.
The euro lost strength against the greenback after opening the session at 1.3736, where the EUR/USD after reaching the highest at 1.3787, the pair reversed to the downside during the European session to reach the lowest at 1.3656, and trades now around 1.3680.
Moody's, the rating agency has also added more complexity to the situation facing France, which is the strongest member in the euro zone after Germany, where the French credit rating of Aaa could suffer from a downgrade in the coming three months as they put the stable outlook could be lowered to a negative outlook as the French participation in bailouts and recapitalizing European banks could stretch the government's budget very much, which added more pressures on the euro to remain weak against the strong dollar and the royal currency.
The common currency lost strength against the sterling pound also, where after the EUR/GBP opened the session in Asia at 0.8724, the pair declined to set the lowest at 0.8685, after reaching a high of 0.8735. The pair is currently hovering around 0.8697.