Posted March 12, 2010
On Thursday, economic data caused the euro to gain against the dollar. Global economic recovery looks stronger giving investors less fear over debt in euro zone.
The dollar fell somewhat against the euro on Thursday. The likely cause was the mixed bag of data released about the economic recovery. The trade deficit is shrinking but imports and exports are declining.
At the start, the euro rose significantly at the better than expected data about the trade deficit shrinking. This helped to improve investor’s outlook on the economy. It was only after a bigger look at the actual data that caused investors to sell off some of the common currency. At the end of the day, the euro was higher against the dollar but off its highs for the day.
The US trade deficit closed the gap some in January, particularly surprisingly. This was due to the oil import volumes being lower than normal, at a rate that was their lowest in more than 10 years. This is according to the US Commerce Department. The deficit on international trade of services and goods moved from $39.90 billion (a revised number) to $37.29 billion within just a month. Wall Street had predicted this gap would be higher than it actually was. The originally reported December trade gap was $40.18 billion. In addition, imports slipped by 1.7 percent and US exports dipped by 0.3 percent.
By late Thursday, the euro stood at $1.3679 which was an improvement from late Wednesday’s number of $1.3653. The other data shows that the dollar was virtually unchanged at Y90.56 and the euro moved above the Y123.63 from Wednesday to Y123.86. The UK pound was up from $1.4966 to $1.5063. The dollar was down from CHF 1.0704 to CHF 1.0688.
The euro did not escape the holdover of doubt from the sovereign debt problems plaguing the euro zone. However, it is likely that the euro will see a slight break from this looming problem since investors were unwilling to take on big positions against the US retail data on sales that was to release on Saturday. This data, when released, is likely to be a key indicator of the rate at which the global recovery is moving, many investors and analysts believe.
In other news, the UK pound did manage to gain against the US dollar. This occurred after the Bank of England produced an inflation survey. The survey showed that the Bank expects a somewhat higher level of inflation over the next year.
The Swiss franc also made some news on Thursday. It moved significantly lower. This occurred after the Swiss National Bank announced and reaffirmed its commitment to prevent excessive currency strength. The Swiss National Bank left the key rates unchanged on Thursday. However, the fleeting currency move that occurred within the market today seems to suggest that currency traders still expect the franc to grow in the coming days and weeks.
In addition to this, US President Barrack Obama made a significant statement today staying that the global economy would benefit if China moved to a market based currency system. The remarks were made for delivery at the US Export Important Bank’s annual conference. Obama says that the change would improve the Group of 20’s broad drive to rebalance the global economy. This would allow those countries that have surpluses such as China to boost the consumption and domestic demand. It would also allow those countries such as the United States with external deficits to save and export more.