FOREX Watch: Global safe havens hold gains amid data
The US and European safe havens were relatively unchanged in mid-week trade, as market participants continue to weigh the latest batches of economic data against monetary policy expectations.
Faster-than-forecasted employment growth helped the US dollar outweigh its commodity-driven rivals, which continued to decline relative to the global safe haven. The Australian dollar fell 115 pips to 0.9020 US, a three-month low, after Australian GDP expanded only 2.3 percent from year-ago levels. A median estimate of economists called for a gain of 2.6 percent. In North America, the US dollar approached a three-and-a-half year high against the Canadian loonie. The USDCAD pair consolidated slightly below 1.07, a gain of 45 pips.
The greenback was unable to extend its winning ways against the European safe havens. The euro consolidated around the 1.36 handle as investors received mixed PMI signals from the region’s largest economies. Service activity hit a ten-month high in Germany, but contracted further in France and Italy. Retail sales across the region declined at an annualized rate of 0.1 percent in November.
Pound sterling consolidated below 1.64 US after service activity in Europe’s second-largest economy declined in November. The UK’s gauge of service activity fell 2.5 percentage points to 60.0, but remained strong, as activity and new business continued to rise at historic levels. The euro was unable to rally against its European rival, consolidating below 0.83 GBP.
Britain’s rate of expansion is likely to rise above 1 percent in the third quarter, according to Markit Group chief economist Chris Williamson. “When looked at alongside the upturns in the buoyant manufacturing and construction sectors, the three PMI surveys indicate that the pace of economic growth will have accelerated in the fourth quarter.”
Construction output in the UK soared to a six-year high in November, according to Markit. The rate of expansion in the manufacturing economy remained elevated on the strength of rapid employment growth. The rapid pace of expansion in the UK could lead to higher interest rates sooner than expected. The Bank of England has yet to comment on when it might consider boosting the cost of borrowing.
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