Dull day on the markets
Currencies Direct January 21st 2011 - 2 minute read
Consolidation hit the forex markets yesterday with little influence from economic data. We received more dialogue from European officials concerning their Emergency Funding Facility, but really only going over old material so no material effect on rates. Trading has looked to concentrate on testing the technical resistance in Eurodollar at 1.3525. We are sitting just above that level at present but we will need to close higher this afternoon in order to signal a shift higher. This concentration on buying Eurodollar has caused the Euro to strengthen across the board with both Sterling and Yen falling.
Yesterday’s data from the US was a bit mixed although overall deemed positive for the economy with interpretation of the numbers largely on the side of them bolstering the recovery. Analysts still consider this to Dollar supportive on the grounds that the currency will be deemed as becoming a growth currency in the months to come. No data from the US scheduled this afternoon.
Two items of interest from peripheral currencies. Firstly the Kiwi Dollar received a bit of a lift yesterday following the release of the New Zealand retail sales numbers for November. The headline figure was reported at +1.5% against expectations of +1.1%. The move higher was short-lived however and it soon fought a losing battle as the Dollar drew support from the previous afternoon’s US data.
Secondly, a comment from the Riksbank Deputy-Governor, Wickman-Parak indicates a possible further strengthening of the Swedish Krona. He suggested that rate hikes from the Central Bank would help contain unsustainable levels of credit growth; this would imply a further strengthening of the currency. Later on, the Swedish PM, Reinfeldt, said that Swedish industry can be competitive even with a stronger currency, further suggesting that policy-makers are still comfortable with further Krona appreciation. Interestingly, these comments appear contrary to the approach being touted by the Norges Bank, from where an official was reported as saying that further hikes in NOK interest rates would be detrimental to the Norwegian economy as they would cause a strengthening of the currency.