Foreign Exchange Rates ? EUR/USD Threatens Near-Term High as US Currency Weakens on Improved Economic Data

Published: Tuesday, 29 March 2011 09:17 BST - Written by John Cameron

STORY LINK Foreign Exchange Rates ? EUR/USD Threatens Near-Term High as US Currency Weakens on Improved Economic Data

The Pound Dollar exchange rate (GBP/USD) is 1.6029. The Euro Dollar exchange rate (EUR/USD) is 1.4136.

Yesterday afternoon’s UD economic data releases showed some encouraging signs for the recovery in the States. Consumer spending figures for last month came out at 0.7%, better than the expected level of 0.5%. However, some commentators dismissed the significance of the rise, pointing to rising wholesale energy costs as a key contributory factor in the increase in US household costs.

Yesterday’s US Housing sector data also bucked expectations, with February’s monthly Pending Home Sales figure coming out at 2.1%. This surprised investors, who had been expecting no rise at all.

Today sees another busy day for data with the key US Consumer Confidence survey due for release at the start of the North American session. If the number comes out better than the positive 66 level expected, then appetite for risk may further increase.

The UK sees a slew of data released at 0930hrs BST, with the highlight being the finalised quarter 4 GDP figure. The other figure that will be closely-watched in the UK is this morning’s Mortgage Approvals number for last month. The figure is expected to show that 46,500 new mortgages were approved in February and a repeat of last month’s encouraging figure would offer further hope for investors hoping for a housing-sector led UK recovery.

Turning to the Eurozone, ECB President Jean Claude Trichet spoke commented yesterday that an ECB rate hike was a ‘near certainty’ for next week. Today’s German CPI Inflation figure could cement the expected tightening of European Monetary Policy if it comes out at higher than the expected 2.1% level.

Turning to the technical aspect of the market, the EUR/USD rate has moved forward by over a cent since the start of yesterday’s session. This improvement has been largely attributed to improved risk sentiment on encouraging US data which has caused the Greenback to weaken. A test of the near-term high of 1.4248 is possible later today if this afternoon’s US Consumer Confidence survey is positive. Meanwhile, the GBP/USD rate has broken back above 1.6000 and looks set to consolidate above this level on improved data.

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