Major Currency Pairs: Pound Slipped Against The Dollar
ICM Brokers | Dec 03, 2013 04:57AM ET
EUR/USD
The dollar strengthened against the euro and most other currencies on Monday after a widely-watched factory barometer beat consensus forecasts and fanned sentiments that the Federal Reserve remains on track to begin tapering stimulus programs in the coming months. Stimulus tools such as the Fed's USD85 billion in monthly bond purchases aim to drive recovery by pushing down long-term interest rates, weakening the dollar in the process, though talk of their dismantling strengthens the currency. The dollar saw support earlier after the Institute for Supply Management reported that U.S. manufacturing activity in November expanded at its fastest pace since April 2011, fueling optimism for more robust economic recovery down the road. The ISM manufacturing purchasing managers’ index rose to 57.3 in November from 56.4 in October. The report said both production and new orders rose by around 3 points to 62.8 and 63.6, respectively, while the employment component of the index indicated some improvement in the labor market in November, rising by a little over 3 points to 56.5.
GBP/USD
The pound slipped against the U.S. dollar on Monday, after upbeat U.S. data but still remained within close range of 27-month highs as data showed that activity in the U.K. manufacturing sector expanded at the fastest rate in 33 months in November. In the U.S., the Institute of Supply Management said its manufacturing purchasing managers’ index rose to 57.3 in November from 56.4 in October, expanding at the fastest rate since April 2011. Analysts had expected the index to fall to 55.0. The pound strengthened earlier, after data showed that the U.K. manufacturing purchasing managers’ index rose to 58.4 last month, the highest level since February 2011, from an upwardly revised 56.5 in October. Analysts had expected the manufacturing PMI to tick down to 56.0. The new orders component of the index jumped to 64.6, the highest in almost 20 years, from 61.3 in October.
USD/JPY
The dollar firmed against the yen on Monday after U.S. factory data beat forecasts and cemented sentiments that the Federal Reserve remains on track to begin tapering stimulus programs in the coming months. Stimulus tools such as the Fed's USD85 billion in monthly bond purchases aim to drive recovery by pushing down long-term interest rates, weakening the dollar in the process, though talk of their dismantling strengthens the currency. Meanwhile, dovish comments out of the Bank of Japan weakened the yen against its advancing U.S. counterpart. The dollar saw support earlier after the Institute for Supply Management reported that U.S. manufacturing activity in November expanded at its fastest pace since April 2011, fueling optimism for more robust economic recovery down the road. Meanwhile the yen came under pressure on market expectations for the Bank of Japan to beef up stimulus programs to meet its 2% inflation target by 2015. Earlier Monday, BoJ Governor Haruhiko Kuroda pledged to counter any new downside risks to the bank’s inflation goal, saying the BoJ would act by "adjusting monetary policy without hesitation.
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USD/CAD
The U.S. dollar rose to two-year highs against the Canadian dollar on Monday, as demand for the greenback continued to be underpinned by expectations that the Federal Reserve will soon start tapering stimulus. The greenback remained supported by the view that the Federal Reserve could start to unwind its USD85 billion-a-month asset purchase program before the end of the year. Investors were looking ahead to Friday’s U.S. nonfarm payrolls report for November, for indications on the timing of a possible reduction in Fed stimulus. The loonie, as the Canadian dollar is also known, shrugged off data on Friday showing that Canada’s economy grew 0.7% in the third quarter, following growth of 0.4% in the previous quarter. On a month-over-month basis, the Canadian economy grew 0.3% in September, above expectations for growth of 0.1%. The Canadian dollar found some support as crude oil prices rebounded on Monday, with light sweet crude futures for delivery in January up 0.64% to USD93.36 a barrel on the New York Mercantile Exchange. Crude oil is Canada’s largest export and the loonie is very sensitive to fluctuations in crude oil prices.
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