Euro Retraces but Still Aiming for Record Highs (page 2 of 2)

The German ZEW survey of analyst sentiment is due for release tomorrow. Given the recent rate hike and turn in economic data, we expect analysts to be more pessimistic.

Pound Sterling races higher as PPI grows by fastest pace in 22 years

The British pound strengthened against the US dollar, Euro and Japanese Yen as producer prices grew by the fastest pace in 22 years.

The annualized pace of PPI growth jumped to 10% last month even though the monthly pace slowed.

Tomorrow we will find out whether producers have been able to pass on a good portion of the burden of record oil prices onto consumers.

Inflation is the only reason why the Bank of England has not cut interest rates as their economy continues to slow.

They are in a very difficult situation now because they want to cut rates. BoE member Barker said this morning that 'The mistake we could make, and we are all worried about this, is of holding policy too tight, and the economy weakening more than is necessary to get inflation back on target.'

Meanwhile BRC retail sales and the RICS house price balance are due for release this evening - which could take some steam out of today's British Pound rally.

Australian Dollar hits new highs

The commodity currencies all raced higher today, but the story is undoubtedly in the Australian dollar.

The Aussie hit a new 25 year high against the US dollar and a seven year high against the New Zealand dollar.

Although there was no Australian data released overnight, the country's diverging economic performance with the US and New Zealand has sent money pouring into Australian dollars.

Retail sales in New Zealand fell by their steepest pace in over four years while the manufacturing PMI index contracted for the third time in four months, adding to signs that the New Zealand economy is in for a recession.

NZD Consumer prices are due for release this evening along with the minutes from the RBA's most recent monetary policy meeting. These numbers should continue to lift AUD/NZD.

EUR/JPY hits another record high

The Euro hit another record high against the Japanese Yen as growing concerns in the US economy continue to push the US dollar lower against the Euro.

Given the drop in USD/JPY, the rise in EUR/JPY is 100% a Euro story. The Bank of Japan has a monetary policy decision this evening.

With consumer confidence and growth deteriorating at the same time that inflation is rising, the BoJ has no room to move on interest rates. This should keep pressure on the Japanese Yen against all of the major currencies.

The fate of USD/JPY will depend on whether the losses in the stock market continue.