Daily currency report

The US dollar has opened lower, coming off highs following positive economic data from the US. Existing home sales figures released helped to offset the new home sales figures seen earlier in the week which were released at a one-year low. Jobless claims saw their biggest weekly drop in a year, which also helped lift the dollar. The euro has made some gains in front of today’s German IFO data, as similarly to the ZEW investor sentiment seen earlier this week, business sentiment in Germany is expected to remain robust. There is also news that EU politicians are working on a comprehensive solution to the debt crisis, which will be announced in coming weeks. In the UK, retail sales data will be released, and with retail sales figures disappointing over the last couple of months there is plenty of scope for sterling vulnerability.

Sterling

The positive impact that eight month high inflation had on sterling earlier this week is starting to wear off. Wage data out showed soft price pressures which were partially offset by the CBI industrial trends survey. The survey showed potential price pressures, even though the headline trends component weakened. Investors are scrutinizing every inflation figure as they try to determine whether upside price risks have grown in the recent days and if the Bank of England’s credibility remains intact.

US dollar

The US dollar was initially lifted after strong economic data was released. On balance the better than expected economic data in the US helped lift the dollar off session lows. Momentum behind the dollar’s gains was lacking going into the weekend and the currency has already given back much of what it achieved in the session.

Euro

The euro has seen sharp gains after news that the politicians are busy hammering out a new deal which will save the eurozone. There has been talk that the European Financial Stability Facility could be used to buy back bonds of some member nations. Eurogroup’s Jean-Claude Juncker said that there would be a comprehensive response to the debt crisis in a few weeks.

Japanese yen

The Japanese yen is back under a bit of selling pressure on increased fears that China could tighten its monetary policy after economic data released this week showed strong growth and inflation.

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