Euro: More Reasons to Hit 1.50 (page 2 of 2)

Even the automobile industry which has been extremely hard hit by the strength of the Euro over the past few years (Volkswagen lost EUR1 billion due to currency fluctuations) is shifting production to the US where costs and profits will be less sensitive to currency fluctuations. ECB officials continue to be worried about inflation. Consumer prices are due for release tomorrow; they are expected to remain above the ECB's 2 percent target for the remainder of the year, keeping the central bank hawkish and the Euro on its way to testing 1.50.

Australian and New Zealand Dollar Pares Gains, But Canadian Dollar Continues to Rise

After rallying for five straight trading days, the Australian and New Zealand dollars have given back their gains on the heels of commodity price weakness. Both gold and oil prices are lower today, allowing New Zealand dollar traders to overlook a rise in money supply and focus more on the drop in building permits. The Canadian dollar on the other hand completely shrugged off the $3 drop in oil prices and the larger decline in industrial and raw material prices. The downtrend in USD/CAD is strong and traders really want to push the currency pair below 95 cents. Canada is so flush with cash that they are cutting the federal sales and corporate income tax. Meanwhile GDP is due for release tomorrow, we are expecting an improvement given the jump in retail sales.

Bank of Japan to Leave Interest Rates Unchanged Again

The Japanese Yen will be in play tonight with the Bank of Japan interest rate decision due for release. Once again, they are not expected to raise or cut interest rates because they have no room to do so. Even though retail sales were stronger than expected and rose unexpectedly for the second month in a row, the trend of consumption growth is slow. Small business confidence remains weak while the unemployment rate ticked higher last month. Until deflation is beat, carry trades will continue to sing to the tune of the Dow.

British Pound Shrugs Off Weaker Data

For the second day in a row, the British pound rallied despite weaker economic data. The CBI industrial trades report declined from 12 to 9 in the month of October. This follows on the heels of cautious comments from the Bank of England. The strength of the pound seems to be driven primarily by carry trade demand. Nationwide house prices and consumer confidence are also expected to weaken tomorrow.