The US dollar has opened sharply lower after US fiscal cliff negations displayed the difficulties facing the US economy, while investors also appear concerned about a proposal to raise the US Government’s debt ceiling which could hit the country’s top credit rating. The news seems to have rattled the US dollar’s safe haven position, which was already weaker following better-than-expected economic data from the world’s leading economies; although month-end positioning is also an influence to watch. US GDP grew in the third quarter at a much faster pace; German unemployment figures and Switzerland’s GDP beat estimates; UK retail sales surged, while Japanese industrial output rebounded sharply at the same time the Japanese Government launched another stimulus programme. Combined, the updates boosted morale amongst investors who responded by opening up more risky currency plays at the expense of the US dollar and yen. But while the global growth picture turned brighter, analysts still remain highly-sceptical about Europe’s growth outlook as well as stuttering progress inside Washington, which is limiting gains.
Sterling
Sterling has opened strongly, attempting to break one-month highs against the US dollar after UK retail sales data suggested that British consumers will continue to drive the economy in the fourth quarter. The Confederation of British Industry published its distributive trades survey for November, revealing that high street spending grew by the most since June. The pound also saw gains against the US dollar amid concerns about US fiscal cliff negotiations which turned cold, but end-of-month trading could weaken sterling.
US dollar
The US dollar is under pressure and is slipping towards five-week lows against the euro on concerns that President Barack Obama’s plans to raise the US Government’s borrowing limit could hit the country’s top credit rating. Negotiations in Washington to prevent January’s fiscal cliff from derailing the US economy, exposed just how far apart the Democrats and Republicans are in terms of agreeing a deal to avoid automatic spending cuts and tax hikes pushing the world’s number one economy into recession next year. The news seems to have troubled the US currency’s safe haven position.
Euro
The single currency has jumped to fresh one-month highs against both the US dollar and British pound following developments but may struggle to hold those levels with the eurozone unemployment data expected to emphasise Europe’s dire growth prospects. The euro gained after economic sentiment figures for the eurozone rose for the first time in nearly a year, and US third quarter growth was shown to be much better than first thought, which inspired traders to take on more risky currencies.