The Dollar fell across the board during Thursday’s session as risk appetite returned and the Euro zone posted positive economic data. Equities rallied throughout the session with the S&P gaining nearly 30 points by the close. US jobless and trade data showed less of a widening in the balance of trade than expected and jobless figures were mixed showing an increase in initial claims but a lowering of ongoing claims, although this could be partly explained by the recent employment of thousands of census workers. The Dollar fell heavily against the Swiss Franc to end the session at SFr1.1417 and was down too to $1.2127 against the Euro.

   The Euro gained sharply against the dollar Thursday after reassurances from the head of China’s state Pension Fund that it was not intending to cut its Euro reserves. Chinese exports also increased by over 40% in the last year; renewing confidence in the emerging markets as the ‘engine-room’ of the global economic recovery. Meanwhile in Brussels the ECB surprised no-one by keeping interest rates at the same level and maintaining their stimulus policy unchanged. There were further signs of stability on European Bond markets as Spain – one of the worst hit successfully launched a new 3-year bond. The Euro reached highs of $1.2141 against the Dollar and ¥110.85 against the Yen.

   Sterling was up again after the BOE rate announcement saw no change from the 0.50% base and global equity markets rallied as positive economic data gave confidence to investors to embrace risk once again. Sterling’s recent rally has also been attributed to the new coalition governments promise to put the public finances back on track and domestic economic data showing a recovery trend. Investors will be watching the raft of economic news tomorrow covering producer prices, manufacturing production and the BOE inflation trends survey for further positive evidence the economy may be ‘rounding the corner’. The Pound reached highs of $1.4716 against the Dollar and lows of £0.8222 against the Euro.

   The Yen fluctuated and had a mixed day as investor’s risk appetite returned amidst positive economic data from round the world. The main economic news out of Japan was an increase in GDP above the 4.2% expected to 5% - above even the 4.9% of last month. However any gains balanced losses due to a return back to riskier currencies such as the Euro. The Yen closed up eventually against the Dollar despite dipping to the 90s at ¥91.32 and was well down against the Pound at ¥134.35.

Analysis prepared by:

Joaquin Monfort
Forex4you analyst