United States dollar continues to decline against euro

Alfred Osborne
January 13, 2018

France's CAC 40 turned down by 0.3% to 5,505.83 after closing on Tuesday at a 10-year high.

French and Spanish Consumer Price Index (CPI) data from December is due for publication on Friday but Euro traders are more likely to wait for next week's German and Eurozone inflation stats before making any moves on the shared currency. Weak inflation at the producer level could add to concerns that the factors restraining inflation could become more persistent and result in the Federal Reserve being more cautious about raising interest rates this year.

The euro jumped a cent, and was trading at $1.2039 at 3:20 pm in Frankfurt. The British pound strengthened against the greenback on Thursday as British pound was dragged higher by stronger euro after minutes of a European Central Bank meeting showed a more aggressive tone, boosting the euro against the US dollar.

They added: "The language pertaining to various dimensions of the monetary policy stance and forward guidance could be revisited early in the coming year".

Investors would probably take a policy message change as a sign that rate-setters may begin to wind down their 2.55-trillion-euro bond-buying program.

The yellow metal benefited from a weaker dollar following hawkish European Central Bank minutes and disappointing United States data overnight. Data showed US producer prices fell for the first time in almost 1-1/2 years in December amid declining costs for services.

GBP/USD - still finding support at the 1.3500 area so far this year but needs to push beyond the highs of last year at 1.3660.

As far as interest rates are concerned, "the immediate risk of change is now low", Bundesbank President Jens Weidmann said in Rottach-Egern, Germany.

Kashkari's motivation was to allow USA inflation rates and wage growth to push higher, but the sentiment concerned traders who are looking forward to three or possibly four interest rate hikes in 2018. The Canadian dollar was last trading flat at C$1.2525 to the greenback. It hit session high at 0.7894 and made session lows at 0.7869 levels. ECB President Mario Draghi credits the stimulus with re-energizing the economy and helping create millions of new jobs as the eurozone's unemployment rate has fallen from above 12 percent to 8.7 percent.

DailyFX US AM Digest US Dollar at Three Year Low versus the Euro

It added to those gains on Friday, rising 0.8 percent to as high as $1.2137, its strongest since December 31, 2014, after Merkel's conservatives and the Social Democrats agreed to a blueprint for formal coalition negotiations, raising prospects of an end to months of political uncertainty in Europe's biggest economy.

Germany's DAX 30 index fell 0.7% to 13,287.31, after dropping as much as 1%.

What's driving the market: Investors took a break from bidding up European stocks after doing so over the past five sessions, the market's longest winning streak since early November.

New Zealand's currency was also boosted by higher commodity prices, with Brent Crude oil rising above US$70 a barrel for the first time since 2014. Dow Jones, S&P 500 and Nasdaq futures were up 0.1 to 0.4 percent.

Bloomberg News had reported on Wednesday that Chinese officials reviewing the country's foreign exchange holdings had recommended slowing or halting purchases of U.S. Treasury bonds, pushing 10-year yields higher and the dollar lower.

Last year, the PPI increased 2.6 percent after advancing 1.7 percent in 2016.

Asian stocks resumed their ascent on Friday, supported by USA earnings optimism and a rise in oil prices while the euro edged higher as the European Central Bank (ECB) signalled an end to its massive stimulus.

Among other precious metals, silver rose by 0.24 percent to record $16.98 an ounce after hitting a two-week low of $16.86 on Wednesday.

The minutes said that the European Central Bank revised its prediction and increased its growth estimate by 0.2 points to 2.4 percent in 2017, while it maintained inflation at 1.5 percent. The failure to overcome the highs of previous year at 1.2095, could be a catalyst for further declines towards 1.1600.

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