Pound Drops on Weaker Data and Forecasts | IFCM
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Pound Drops on Weaker Data and Forecasts - 17.11.2011

US Dollar The dollar appreciated further against its major counterparts, touching this morning a 5 week high against the euro, the Australian, the Canadian dollars and the Swiss franc, and a 4 week high against the pound. The dollar index surged to 78.39, the highest since October 10 after reports in the US indicated an increasing manufacturing activity. Industrial production in the world’s largest economy advanced in October more than economists initially estimated, leaving more space for growth acceleration in the fourth quarter. Industrial output climbed by 0.7% following a revised 0.1% drop in September. At the same time another report showed that the cost of living decreased in the same period – the annualized CPI growth pace fell to 3.5% from 3.9%, in line with the US central bank’s forecasts. Euro After touching a 5-week low versus the dollar (1.3421), the single currency pared losses by the end of the Asian trading session climbing above 1.35. The Italian government bonds’ yields - one of the most concerning issues of the week – dropped slightly toward the 7% threshold as the ECB purchased larger-than-usual sizes and quantities of the nation’s debt under its Securities Market Program, Bloomberg informed without mentioning the exact source of information. Today the new Italian Prime Minister Mario Monti will present his program to the Senate and a confidence vote will follow, that could be perceived positively by investors and give some support to the euro. British Pound The pound touched this morning the lowest level since October 20 against the greenback – 1.5691, but manages to recover somewhat later in Asian trading hours. The pound depreciated yesterday after the Bank of England Governor Mervyn King said that Britain faces a “markedly weaker” economic outlook and that failure to deal with the debt crisis in Europe would lead to “significant adverse consequences.” In particular the unemployment rate in the UK has already increased to 8.3% in September from 8.1%. “The unemployment rate is the highest since 1996 and the number of unemployed people is the highest since 1994,” the Office for National Statistics said. To support the economy the central bank increased its asset purchase program to 275 billion pounds in October, expecting that inflation will still fall to 2% within two years. The minutes of the latest policy meeting will be released next week and will show whether policy makers considered that more stimuli were needed.
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