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One day dollar capitulation....

One day dollar capitulation....

This morning the markets are relatively steady after the severe volatility experienced yesterday. The USD is still on the back foot after falling over 4% against the euro and just under 4% against the pound; the USD fell against a basket of currencies as investors sought other avenues following the Feds plans to buy $1.2tn of debt. Effectively the fed is creating money in a similar context to Quantitative Easing; last week the Swiss Franc was heavily sold off after introducing QE and previously the pound was also sold following QE’s introduction. The sell off in the dollar was its biggest one day loss since 1985 and follows a prolonged period of US dollar strength.
The euro gaining more against the greenback than sterling allowed it to push higher against sterling; GBP/EUR is still caught in a tight trading range with the euro at the moment still holding firm. Data just released from the eurozone in the form of January industrial production showed a decline of -3.5% month on month, versus median forecasts of -4.0%. The monthly decline is the fifth straight month of contraction and is an awful figure from the eurozone- the euro bulls will be quaking and rightly so…
Fed chairman Ben Bernanke will be speaking later today at a convention in Phoenix so his comments on recent developments will be scrutinized.


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