Weak Global Data Causes Stock Market Losses And Support For The US Dollar

Modified: Friday, 23 March 2012 08:04 BST - Written by David Woodsmith

STORY LINK Weak Global Data Causes Stock Market Losses And Support For The US Dollar

The Pound To US Dollar Exchange Rate is 1.5864.

Yesterday’s session in the currency markets was marked by a flight to safety from institutional investors, which saw the safe-haven US Dollar well-supported and the high-yielding Australian Dollar, New Zealand Dollar and South African Rand sold off. Global share markets also registered losses on the day, with London’s FTSE 100, Frankfurt’s Dax and Paris’s Cac 40 all closing down by more or less 1%. US and Asian indices have replicated these losses since Europe’s close last night.

The ‘risk-off’ trading environment was driven by the release of a raft of negative data sets in some of the world’s leading economies during yesterday’s session. The day started badly when figures released in China showed that manufacturing activity had dipped for the fifth successive month. The theme of negative numbers continued with a very weak set of German PMI figures, which suggested that the eurozone’s leading economy is beginning to experience adverse effects as a consequence of the region’s ongoing debt crisis. Weaker than anticipated Retails Sales data from the UK and Canada, along with poor US housing sector figures, completed the gloomy picture.

Worries for the eurozone were stoked by Irish growth figures, also released yesterday, which showed that the Republic’s economy had contracted by 0.2% in the three months to the end of December 2011. If this morning’s Italian Retails Sales numbers show that the country’s self-imposed austerity measures are beginning to weigh down the country’s economy, then a further flight to safety is possible in global markets before the weekend’s close, causing a renewed shift into US Dollar denominated assets. Such a scenario could also serve to weaken the euro, sending the GBP EUR exchange rate back toward its 18-month high of 1.2168.

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