Blinkered politicians in Europe and US continue to drive Euro Dollar currency pair, MPC could pave way for further QE today

Tom Tong23/Nov/2011Currency Updates

USD

Yesterday saw some short term moves on the Euro-Dollar as the IMF approved changes to credit line structures for member nations, however as Europe continues to falter, it is obvious that the US would effectively bankroll this, which is unlikely to be approved by Congress. FOMC minutes released yesterday were fairly dovish and did not do anything to rock the dollar. This morning in Asian trading,the dollar hit a six-week high against a currency basket, as the safe-haven US currency was broadly boosted by worries that new talks to rescue Belgian-French bank Dexia may raise concerns about fiscal pressures on France.

EUR

The euro slid for the sixth time in eight days against the dollar before data that may add to signs that Europe’s debt crisis is damping economic growth. Ground was lost to its major rivals early Wednesday ahead of key European manufacturing data. The moves came as stocks fell, first in the U.S. and then on Asian bourses, weighed by a downward revision to U.S. economic growth and a surprise contraction in Chinese manufacturing, according to the preliminary HSBC Purchasing Managers Index. The euro was likely to react to the preliminary euro-zone manufacturing PMI, due out later in the day, along with separate PMI results from France and Germany.

GBP

Sterling fell to a six-week low against the dollar on Tuesday as riskier currencies were hampered by concerns about failed plans to cut the U.S. deficit and the euro zone’s entrenched debt crisis. Sterling also fell to a three-week low versus the euro. Today, focus switches to the release of minutes from this month’s meeting of the Bank of England’s Monetary Policy Committee. Economists expect the minutes to reflect readiness to extend quantitative easing further, which the central bank flagged with sharp cuts to its growth and inflation forecasts. If no QE is announced as expected, the sterling is likely to rally.

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Written by Tom Tong

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