Daily Forex Analysis by Finexo.com 14/12/2009


The US Dollar gained broadly on Friday after a Retail Sales report came in stronger than expected, boosting the hopes, once again, that the US will move to raise interest rates sooner than initially predicted. The US Commerce Department announced that retail sales had risen by 1.3%, a figure that was .7% higher than analyst forecasts. On the same note, another report from the Commerce Department showed that Consumer Sentiment had also risen beyond expectations, adding to the belief that the consumer driven economy was beginning to gain momentum.

Investors are hoping these numbers continue their pattern as it is believed that if by the next Federal Reserve policy meeting in February, this data continues to show improvement, the Fed will likely be compelled to raise interest rates from their near zero level. A rise in the core rates will add to Dollar strength as the US currency will be more expensive to borrow.

At the close, the US Dollar was trading up .8% against the Euro to 1.4615, up 1.02% to the Japanese Yen to 89.1, up .1% versus the British Pound Sterling to 1.626, up .81% against the Canadian Dollar to 1.06 even and up .4% to the Australian Dollar to .9125. The Dollar also rose .82% against the Swiss Franc to close out the week at 1.0342.


The British Pound Sterling was mixed to slightly higher on Friday after a senior executive at Moody’s, the debt rating organization, said that the England’s ‘AAA’ rating is not in jeopardy at this time. The comments clarified a report earlier in the week which panicked traders who interpreted it as a warning that a rate cut was imminent. According to the statement, the announcement last Tuesday regarding the state of US and UK sovereign debt rating was meant as a “wake-up” call to those countries that if their issuance of debt continues at this pace, the countries run the risk of having their ratings cut as the debt to GDP ratio will get out of hand.

The statement read: “While these are extraordinary times calling for non-conventional measures, it is not an excuse to act irresponsibly with regard to a nation’s percentage of debt to GDP. It is the fact that some countries are approaching this state that prompted the reminder to every one of the consequences that go with overspending. This was not meant as a specific warning that a decline in rating was imminent, rather a caution that one could come if responsibilities are not met.”

At the close, the Pound was up .7% to the Euro to .8986, up .92% against the Japanese Yen to 144.89, up .32% versus the Australian Dollar to 1.7815, up .7% to the Canadian Dollar to 1.7237 and up .73% to the Swiss Franc to 1.6818.

Chart: EUR/GBP

The EUR/GBP is beginning to get interesting as we head into the new week. As the most recent focus has been on the 0.9020/00 support area, Friday saw the pair close off below that and is now skimming along the 21-day moving average. We are now ready to test the 200-day moving average below 0.8900, if it does get there, this could be a long week for the Euro.


Written by Finexo.com