US Dollar weaker on deficit data

Story link: US Dollar weaker on deficit data

As expected, the Bank of England’s Monetary Policy Committee raised interest rates by 25 basis points to 5 percent on Thursday, but the statement that accompanied announcement of the rate hike provided little guidance as to where rates will go in the future. The lack of information spurred a sell-off that sent sterling lower versus the euro. The UK currency dropped 0.6 percent in relation to the shared currency to £0.6732.

The euro was also helped by remarks from a member of the executive board of the European Central Bank that implied that further interest rate hikes in the Eurozone are coming up. Lorenzo Bini Smaghi said in Milan the current price of borrowing money is “too accommodating”. The euro added 0.7 percent to ¥151.40, yet another new record high.

The US dollar continued to weaken as it was reported that the nation’s trade deficit narrowed less than had been expected, to $64.3 billion. Also damaging the dollar was a statement from the governor of the People’s Bank of China that it was planning to diversify its foreign exchange reserves, which now are around 70 percent in US currency. The greenback was 0.1 percent lower against both the yen and sterling, to ¥117.80 and $1.9070 respectively, while it dropped 0.7 percent versus the euro to $1.2840.

Weak employment data in Australia sent the Australian dollar 0.4 percent lower against the dollar, to $0.7670 as the figures were said to be another sign that interest rates there have hit their ceiling for now.