Dollar makes gains as positive data continues - markets eye Friday’s job data
06/Jan/2011 • Currency Updates•
Sterling lost ground against the dollar on Wednesday after data form the US showed companies were hiring at a much faster pace than anticipated while activity in the UK construction sector contracted last month.
The monthly construction index suggested Britain’s economy was on shaky ground and backed expectations that domestic interest rates are likely to remain on hold despite sticky inflation. Sterling on Wednesday lost around 0.6% of the 1% gains made against the dollar on Tuesday following on from the positive manufacturing data.
The pound did lose some ground against the euro on Wednesday due to the poor construction figures, however renewed concerns over the Eurozone’s debt struggles limited losses as investors’ appetite for riskier assets waned.
Further positive US data helped the dollar to make gains versus most major currencies on Wednesday, prompting hopes in some quarters that the Federal Reserve may bring an end to quantitative easing sooner than planned.
Signs of improvement in the struggling job market via the ADP survey of US private sector employment also increased confidence in the dollar, and with expectations for Friday’s non-farm payroll figures increasing as a result, we may see further gains from the greenback yet.
The euro made losses against both the pound and dollar over Wednesday, with seemingly no end to the sovereign debt crisis in sight – a belief evidenced by the Irish Independent reporting yesterday that the Swiss national bank won’t take Irish government bonds due to be repaid between 2011 and 2025 as collateral.
Investors are worried about the amount of refunding and public financing that may have to be pumped into Europe this year and see no reason to ignore a rallying greenback in preference to the common currency.