3 Reasons Why the Euro Weakened (page 2 of 2)

UK jobless claims dropped more than expected in December while earnings including bonuses held steady. This is encouraging for the pound because it suggests that the financial sector troubles have not translated to massive layoffs in the UK. The RICS house price balance was the weakest since the early 1990s house price crash but the problems in the UK housing are already priced into the British pound. There are no UK economic numbers due for release over the next 24 hours which suggests that a further bounce may be possible. Our Technical Analyst Jamie Saettele believes that we will see an explosion higher in the GBPUSD. Read our GBPUSD Bottom Report for more details.

Australian, New Zealand and Canadian Dollars Continue to Weaken

Broad dollar strength and falling commodity prices have pushed the Australian, New Zealand and Canadian dollars lower. New Zealand consumer prices rose by 3.2 percent on an annualized basis in the fourth quarter, which was stronger than expected, but that has failed to lift the Kiwi. Australia will be releasing its labor market report this evening. Although it may be difficult to match the healthy numbers reported in November, we still believe that Australia will report solid job growth. Later in the day, Canada will be releasing their report of international securities transactions. Foreign purchases of Canadian securities dropped significantly in the month of November, so a rebound is expected.

Carry Trades See Sharp Intraday Reversal

Sharp volatility in the stock market has triggered sharp moves in carry trades. Most of the Japanese Yen crosses fell to fresh lows in early European trading but they managed to recover all of those losses and then some throughout late European and US trading sessions. Japanese economic data was mixed with machine orders and CGPI beating expectations but the trade numbers fell short of expectations. The recent Yen strength is expected to take a big toll on exports. Last year, Japanese automaker Toyota unseated Ford as the world's number 2 automaker by sales. If the Yen remains strong, we would not be surprise to see Ford steal the title back from Toyota in 2008.