Euro fails to recover recent losses

Euro fails to recover recent losses

Yesterday and overnight we had little movement in the markets comparative to what we have been used to. The euro remains on the back foot and has slipped further against the USD, JPY and the pound. Part of the euros weakness could be linked to the news that bank lending in the eurozone is continuing to contract and this could maintain low interest rates for some time as deflation fears kick in.

European stocks are also coming under selling pressure and overall this has heightened a move into risk aversion with the FTSE, Dow and Oil dipping and leading to the USD gaining against the euro and the pound. Today we do not have any major risk events in relation to economic data with tomorrow grabbing the attention in this regard with UK net lending and money supply; US GDP and jobless claims and German unemployment and eurozone consumer and economic confidence. Later today we have Durable Goods and New Home Sales from the US, yesterday the Conference Board reported that US consumer confidence fell to 47.7 in October from 53.1 in September.

This weakness in confidence would have contributed to the move into risk aversion in the markets. Overnight we had some price action in the AUD after CPI data came in stronger than expected at 1% against a 0.8% forecast. This number in theory should have led to a stronger Aussie Dollar- after the news the AUD jumped higher but then gave up all its gains and weakened overall. It seems that a 50 basis point rate rise may not be set in stone and this is causing some unwinding and profit taking on the AUD.

report by Phil McHugh

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