Euro: On Its Way to 1.58 (page 2 of 2)

British Pound hits seven week high

The British pound rallied for the third day in a row against the US dollar, hitting a seven week high in the process.

Although the pound strengthened across the board, there was little to drive the move other than the weaker US dollar.

Ironically enough, Bank of England members testified before the Treasury Committee today and their comments were relatively dovish as central bank Governor King specifically noted that the market is too aggressive in pricing rate increases.

The only reason that could explain the sterling's strength is expectations for tomorrow's GDP and current account figures. No revisions are expected to the Q1 growth figures but the current account deficit could narrow given the strong trade balance reports for the first quarter.

Australian Dollar hits six year high against New Zealand Dollar

Despite higher commodity prices, the Canadian, Australian and New Zealand dollars gave back some of their gains as high yielding currencies came under the pressure of falling risk appetite.

Economic data from the commodity countries was mixed.

Australia reported stronger leading indicators and higher job vacancies while New Zealand reported a less than expected improvement in the current account deficit.

This divergence in economic activity drove the Australian dollar to a six year high against the New Zealand dollar. New Zealand GDP and the trade balance are due for release this evening. Growth is expected to contract given the sharp deterioration in consumer spending last quarter. Trade should also be weak given the drop in business PMI.

Yen crosses crumble under the weight of the Dow

Japanese Yen crosses crumbled under the weight of the Dow.

Even though EUR/JPY hit a record high during the European trading session and CHF/JPY climbed to a 17 year high right before the US open, most of the Yen crosses struggled throughout the US trading session.

The fear of further trouble in the banking sector has taken a big toll on risk appetite. There is a lot of Japanese economic data due for release this evening including unemployment data, consumer prices, retail sales and industrial production.

These reports have a better chance of being weak than strong, but that may only have a minimal impact on the Yen. What matters now is whether the Nikkei follows the Dow lower and if it does, the Yen crosses will continue to weaken.