Euro Hits Record Highs, Can it Break 1.50? (page 2 of 2)

Meanwhile the UBS Consumption Indicator also came out stronger than expected, helping to lift the Swiss Franc.

New Zealand Dollar Surges to 24 Year High, Oil Prices Trigger Strong Gains in the Canadian Dollar

The Canadian, Australian and New Zealand dollars are all up strongly on the back of broad dollar weakness and rising commodity prices. The biggest market mover today on a percentage basis was USD/CAD which fell more than one percent. There was no meaningful economic data released from any of these 3 countries and tomorrow we only have tier 2 economic data which includes New Zealand building permits and business confidence. This means that any further appreciation in the commodity currencies will be driven by commodity prices, sentiment and the US dollar. For the time being, we see no reason for the current trends to change.

British Pound Fails to Waver on Weaker Economic Data

The British pound rose over 200 pips today despite a disappointing survey of CBI distributive trends. According to the report, sales fell for the first time in over a year. However Bank of England member Besley is not alarmed by the weakness of consumer demand and in fact, he feels that the recent fall in the British pound should help exporters. It will be interesting to see if the British pound is able to hold onto its gains following the GfK consumer confidence report and GDP. We expect growth to slow in the fourth quarter as retail sales dropped two out of the last three months of 2007.

Carry Trades Continue to Struggle

The Dow rose 100 points yesterday and 100 points today but carry trades have continued to struggle. USD/JPY, AUD/JPY and NZD/JPY have not participated in the rally, leaving EUR/JPY, CAD/JPY and GBP/JPY the only ones at the party. We continue to believe that carry traders need to be particularly selective because the current market environment is not conducive to a carry trade rally. Japanese economic data was stronger than expected with both corporate service prices and small business confidence beating expectations. There will be no Japanese economic data released this evening.