The unchecked uptrend in oil continues to weigh on the US dollar, as the greenback posted losses against all major currency pairs on Wednesday. Escalating violence in Libya which reached dangerously close to oil centers, sent oil up more than 2%, and pushed gold to new record highs.
The Euro rose to its highest level since November, when the Irish banking crisis sent the Euro tumbling. More recently, the market has ignored the underlying sovereign debt problems, focusing instead on interest rate considerations. PPI data showed prices rising 1.5%, more than expected, as inflation continues to exceed the ECB’s targets. Prices have risen 6.1% for the year, as energy prices have soared 12.5%. ECB chairman, Trichet, is expected to address the runaway oil prices, and their impact on the Eurozone, in the ECB press conference scheduled for Thursday, following the bank’s rate decision.
The Pound’s advance continued, rising to its highest levels since January 2009, as prices broke past the November highs and closed above 1.63. Construction PMI in the UK showed construction growth that was better than expected, rising to an 8-month high. Healthy signs of economic growth are likely to encourage the Bank of England to raise rates quickly, as inflationary pressures mount.
In the US, the ADP Employment Change report showed job growth in the private sector which exceeded estimates, as the economy added 217K jobs, 39K more than expected. The report is generally seen as a good forecast for Friday’s pivotal non-farm payroll’s report. The Fed’s Beige Book indicates that prices are rising for manufacturers, suggesting that inflation may soon become a real concern in the US as well.
Looking at Pacific currencies, the yen briefly spiked to a 4 week high against the dollar, dropping to 81.55 before bouncing back. Australian building permit requests sank to their lowest level in 8-years, down 15.9%. The decline was steepest in flood-hit Queensland, where permit requests tumbled nearly 30%, as the storms took their toll the economy.
Thursday’s highlight will be the ECB press conference. Retail sales data is due from the US, Switzerland, Germany, and the broader Eurozone. US non-manufacturing PMI and non-farm productivity are also scheduled for Thursday morning.
Written by bforex.com
