Dollar may have lost its euro driver and now looks to risk trends

US Dollar:

The dollar is doing more than taking a mere break. The benchmark currency may have been knocked off its bullish path. With the euro finding a tangible level of stability and risk appetite trends failing to play to the dollar’s role as a ‘safe haven’ currency, the fundamental drive is sputtering. This does not mean that a full-on selling effort is inevitable but it does significantly reduce the probability that the greenback will quickly revive the recovery effort that it launched at the beginning of November. Assessing the dollar’s performance, Friday’s close produced the third consecutive decline and subsequently marked the first weekly loss in four. More specifically, the tumble through the final 24 hour period was the sharpest since October 20th. This wasn’t the most the most discouraging development for the currency. Far more troublesome is the reality that the dollar plunged against high risk and fellow safe havens alike. The fact that EURUSD plunged 1.6 percent and AUDUSD rallied an equivalent distance is not as remarkable as the more balanced USDJPY suffering its big¬gest dive since May 20th while USDCHF endured its worst decline going back to May 8th of last year.
DATA : No major data to be released today

Pound:

The pound had its first weekly gain versus the dollar in a month after the European Central Bank said it would delay stimulus withdrawal to calm market turmoil as investor appetite grew for higher yielding assets. Sterling was little changed versus the euro last week after ECB President Jean-Claude Trichet said the bank will not withdraw emergency liquidity measures designed to support euro- area economies. The U.S. added fewer jobs than forecast and the unemployment rate unexpectedly increased. U.K. stocks rose. Continuing the theme of a light economic docket on Friday the pound only had the November PMI service sector activity reading to respond to. And, a barely off the mark reading gave traders little to work with. This week’s docket is the exact opposite of what we have seen this past week. Amid all the data, the top potential catalyst is the BoE rate deci¬sion.
DATA : No major data to be released today

Euro:

Though the euro would finish Friday lower against the Australian dollar and Swiss franc, this does not detract from the currency’s remarkable strength. In fact, both the Aussie and Swiss currencies surged against all of their own counterparts through the session. Looking to other crosses, EURUSD would put in for its most ag¬gressive rally in six weeks, and EURGBP climbed for a third consecutive session. If we were scanning the eco¬nomic docket for the motivation to this move; we would come up short. Final service sector PMI figures and re¬gion retail sales is not influential. What was significant was rumours that the ECB was buying Irish, Greek and Portuguese government debt in an effort to lower yields during an otherwise think liquidity month. Furthermore, Spain passed new austerity measures and Germany raised its growth forecasts.
DATA : No major data to be released today

General:

Aside from the franc, the Aussie dollar was the best performer through the week’s close. With the sharp recovery in risk appetite, the market’s favourite high-yield currency is clearly exploiting its best values. However, we have seen domestic readings of health deteriorate in recent weeks. If risk appetite trends them-selves don’t maintain their rapid ascent, the Aussie dollar may succumb to the tepid outlook for further hikes.

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