Political worries continue in Europe as dollar continues to strengthen
13/Mar/2013 • Currency Updates•
The pound dropped today, touching the lowest level since June 2010 against the US dollar, as data released yesterday showed that factory and industrial production declined in January. UK industrial output dropped 1.2 percent in January from December. Factory production declined 1.5 percent in the same period. The data confirmed that Britain’s economy is experiencing tough times, driving investors away from the nation’s currency. However, UK retail sales rose at their fastest rate since 2009 in February, as the improved weather enticed spenders back to the High Street.
The euro continues to try and shake off the hangover from the lingering Italian Election. The uncertain result in Italy continued to weaken the single currency and knock confidence. The ECB decided to keep interest rates fixed at 0.75 percent and bank President Mario Draghi gave investors confidence with his optimistic statements at the press conference. Draghi claimed there were several signs that confidence in the region was being restored. He also gave the impression that the bank was not planning to intervene in the future. Yesterday saw the Troika meeting being postponed with the Bundesbank seeing trouble ahead for the Eurozone. Unconvinced that the eurozone crisis is over, Germany’s central bank is stockpiling billions in order to get through what it thinks is more difficult as the sovereign debt crisis continues.
Interestingly, the Hungarian government has made a decision to change its constitution and limit the power of its top court is a direct challenge to the European Union, and the uncomfortable truth in Brussels is that little can be done to rein Budapest in quickly. Alarm bells will be ringing for officials in Europe as peripheral nations are beginning to test their claims to sovereignty. European Commission President Jose Manuel Barroso issued a statement immediately after the Hungarian vote saying the amendments “raise concerns with respect to the principle of the rule of law”, and EU legal experts have begun examining the changes to see where Hungary may have violated EU law.
It has been a slow week for news out of the US with Friday’s Non-Farm Payroll figures still in focus. The USD has continued to benefit from its safe haven status as volatility from the problems raging in Italy and Spain and poor performance of Sterling continue to help the currency strengthen. The bullish sentiment surrounding the green back gathered pace after an extremely positive non-farm payroll reading. The US economy added a remarkable 236000 jobs which sent the dollar soaring as the reading beat even the most optimistic forecasts. The unemployment rate dropped from 7.9% to 7.7%, its lowest level since December 2008.