The Dollar fell yesterday as equity markets rebounded and the Euro stabilized. The global economic recovery’s golden boy failed to live up to expectations for once as economic data caem out mixed or well below estimates. A surprise increase in unemployment with initial jobless claims at 470k – was much higher than the expected 455k. This was offset a little by an overall decrease in the figure for continuing jobless claims. GDP was slightly up from last month but down considerably YoY prompting fears of deflation. The Dollar closed at 1.2367 against the Euro and 0.8512 against the Australian Dollar.

   The Euro rallied as economists argued the upside of devaluation was the increased competitiveness of Euro zone exports. Fears dissipated that the Chinese might sell their holding of Euro bonds. The Spanish parliament passed a 15bn austerity bill by a cat’s whisker and sovereign debt yields on some of the peripheral bond instruments fell. Economic data was more or less as expected. The Euro closed up at 112.52 against the Yen and up at 1.2367 against the Dollar.

   The Pound rose against most currencies during Thursday’s trading despite poorer than expected retail figures showed a drop in retail sales last month, although the trend remains up after several strong months previously. Further gains were attributed to an increase in investor’s risk appetite after a stabilization of the European Banking crisis. Sterling closed at 1.4580 against the Dollar and 132.72 against the Yen.

   Data published late last night confirmed continuing deflationary pressures in Japan with both the Tokyo and National price indexes down slightly. Household spending was down quite a lot from an expected 2.5% increase to an actual -0.7%. Other figures showed a slight worsening in the employment situation. The Yen saw further loses across the board, closing down against the Euro at 112.52 and closed down against the Dollar at 91.03.

Analysis prepared by:

Joaquin Monfort
Forex4you analyst