THE TAKEAWAY:The US Dollar is trading lower into the end of the week as strong Chinese data buoys risk appetite while the Euro rallies after the ECB policy announcement.
The US Dollar finished last week on a negative note as a strong set of US Manufacturing data caused a rally in the S&P500 index and reduced demand for the world’s most liquid currency. After a brief consolidation, supportive comments from ECB President Mario Draghi and a further move lower in Spanish bond yields drove hopes for improvement in the Euro-zone. This sent the Euro higher, putting de-facto downward pressure on the greenback as the single currency’s natural counterpart. Optimism was swiftly stifled however following a weak set of German Manufacturing data.
The weak and struggling Australian retail sector disappointed in November, pushing AUDUSD below 1.05 in a matter of minutes and sending waves of US Dollar strength reverberating around the FX space. The rally was cut short however as China’s exports rose dramatically more than economists expected, sapping safe-haven demand for the Dollar anew. This was further reinforced by yet another push higher from the Euro after Draghi said the decision to keep interest rates on hold this month was unanimous following the ECB policy announcement.
In the early hours of Asian trade, newswires reported that Japan’s fiscal stimulus package had been approved by the Cabinet. This added more fuel to the recent USDJPY rally sending the Dollar past the 89.00 Yen mark for the first time since June 2010, helping to drive a broader rise in the greenback.