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The euro currency liquidation continued as the starting for the beginning of the week with the pair falling below the 1.44 amount in early UK trade after staging a mild rally in Asian session. The primary reason for the euro currency to fall so suddenly is the weakness over the year and also the end of the year for profit taking as forex traders try to lock in profits and gains for trading before they fall in front of them.
trade today was also influenced by lackluster EZ PMI data which printed at 53.3 vs. 54.1 expected. While the PMI readings continue to remain above the key expansionary level of 50 they do suggest that growth in the region is moderating considerably, especially in services where the gauge fell to 53.2 from 54.1 weighed down by the problems in capital markets. In short, the PMI news offers ECB no ability to raising rates in the near future despite the strong pricing pressures throughout the Euro-zone economy. With focus now shifted from US rate cuts to EZ rate hikes, those news tonight only managed to accumulate EURUSD accelerate decline.
As some noted in dailyfx weekly news it was written than: “With only a few weeks left in the year the need to lock in profits could persist next week and provide dollar with an added boost as more EURUSD longs are unwound… If (US economic) numbers meet or beat expectations the greenback may have more room to go.” this was a direct hit and a successful prediction.
Meanwhile, the GBP also went a bit down during the night as the rates went down for another –3.2% on a month over month basis (you can see this from ForexCult.com main page rates and charts) The latest news regarding Prime Minister Brown which showed his approval ranking sinking to –26% from +48% just 4 months ago also didn't helped much.
in the meantime... The new elections are not to be scheduled in UK until another year from now and this is at the earliest, political discontent will not help the GBP at all, all political issues can hurt any currency as it's well known and happened before. With cable touching near the 2.01 figure a break of that element could precipitate a test of the psychologically important 2.0 rate sometime this week and over the weekend as dollar rally to becoming 1.40 and even less against the euro currency continues.
08:57
Posted on Dec-17-2007
