USD benefits from elevated levels of risk aversion

Tom Tong15/Dec/2011Currency Updates

GBP

Better than expected economic data boosted the UK yesterday.

Jobless claims showed a higher number of claimants in November – 3,000, slightly higher than the 2,500 in October but much lower than the expected 5,300 figure.

Furthermore the claimant count came in a 5% for the month, lower than the 5.1% growth rate that the markets were expecting. Finally despite no change to the UK’s unemployment rate – 8.3%, it remained at its highest level since 1996.

We have more data released today, whether it will be enough to boost GBP is difficult to asses. At 9:30 am GMT we get things up and running with the UK’s retail report and consumer inflation figures, following this at 11:00 am we have CBI industrial orders.

EUR

With Euro currencies bracing themselves for potential rating downgrades and Italy forced to accept higher costs to borrow the Euro remains very much in a troubled situation. Subsequently the Euro was sold off even more against currencies considered safe havens by the market.

Furthermore economic did little to hep the Euro yesterday. The report on industrial production came in at -0.1% which was in contract to the expected 0.1% gain.

Today we have a whole host of economic data, PMI surveys are expected to be lower than last months, these will be published from 8:30am GMT. The consumer price index at 10:00am GMT is expected to show a 3% rise in prices, similar to last month,

USD

The USD once again benefited from risk aversion, gaining against all its major counterparts yesterday.

There was very little of note released on the data front yesterday so traders had their eyes firmly fixed on the ongoing Euro one debt crisis. No sign of a strong solution by EU officials is massively benefiting the greenback.

Today from 1:30pm GMT we will see more important economic data releases. PPI, weekly jobless claims figures, current account balance, TIC long term purchases data, industrial production, Empire State manufacturing index and Philly Fed Index.

Producer price levels are expected to increase by 0.3% in November after falling by 0.3% in October. The core version of the report – excluding food and energy prices, could show a 0.2% increase, up from its flat reading last month.

Weekly jobless claims are expected to come in a fraction higher than last week – 389k, they came in at 381k the week before. An even higher number would have a negative impact on the US labor market as it would mean more individuals filed for jobless claims.

The current account balance could potentially show the deficit falling from 118 billion USD to 108 billion in the third quarter.

Finally both manufacturing indices are expected to show improvements, the Empire State Index is forecast to climb from 0.6 to 3.1 and the Philly Fed from 3.6 to 5.1. If we see better figures it will indicate that the US manufacturing industry’s growth is strong and expanding quicker than expected.

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Written by Tom Tong

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