Euro exchange rate up against the US dollar

Foreign Exchange - Pounds Sterling and Euro Exchange Rate Outlook

The US dollar rate was already losing ground yesterday morning in New York, with the best level at 10 am at 1.4040, just shy of the round number 1.40. The euro exchange rate proceeded to put on gains all day, closing at 1.4080, although the range was narrow 40 points and the euro rate bounce was interpreted as the normal bounce off a level near support. The US dollar rates was on the firm side across the board yesterday on the global stock market story, with the riskier currencies (Canadian Dollar and Australian Dollars exchange rates) tracking US equities point-for-point.

But the euro exchange rate move kept going and turned out to be more than bounce, reaching 1.4135 by 7 am ET today, on the news that the German ZEW investor sentiment index rose to 56.1 in August from 39.5 in July and far better than the forecast of 45. Yesterday, US data was also pretty good, suggesting risk aversion on equity losses was overdone. The US data set the stage for the Germany data today. Well, that was one bounce. As of 8 am, the nice ZEW effect is already wearing off and the euro exchange rate is down to near 1.4100.

You'd think risk aversion would be too important a phenomenon to seesaw back and forth in a single day. Maybe it’s the wrong name, or maybe we are attaching too much importance to it. When we first started to use the term, we thought it was pretentious and self-important, but gradually came to accept it along with everyone else as useful shorthand. But now we are back to thinking "risk aversion" is pretentious and too weighty for the sentiments it is describing - plain old greed and fear.

Market News Singapore reports today the euro/yen and dollar/yen tracked the Shanghai and Tokyo stock markets move-for-move all morning in Asia, with improvements in the equity indices reflected almost immediately. "Euro-yen, a popular risk sentiment play, rose strongly earlier in the session, mounting its Y133.32 overnight to hit a peak of Y134.20 this morning. But by midday here, the cross was drifting back down to Y133.71 as stock market indexes headed back south." Special Case - the Mexican Peso: The US dollar rate rose strongly against the peso for the biggest one-day move since May, according to Bloomberg, led by the drop in global stocks yesterday that led traders to think the rise in "higher-yielding, emerging-market assets has outpaced the prospects for economic growth." The dollar peak in March at 15.5803 and dropped to 12.7686 last Friday, or about 17%.

Also, the Brazilian real fell "to the lowest this month as foreign direct investment in China plunged in July and Japan’s second-quarter economic growth missed estimates, raising uncertainty about the global economic recovery. The currency lost 1.7% to 1.8807 per U.S. dollar at 5:09 p.m. New York time, from 1.8484 on Aug. 14. It earlier fell as much as 1.9%to 1.8840, the weakest since July 31. Today's drop pared the real’s gain this year to 23%, the best performance against the us dollar exchang rate among 26 emerging-market currencies tracked by Bloomberg. The Bovespa stock index declined 2.5%, the most in eight weeks.”

Pounds to US Dollars = 1.6550
Pounds to Euros = 1.1768
Euro to Pounds = 0.8495
Pounds to Australian Dollars = 2.0550

Bye For Now

Barbara Rockefeller
Foreign Exchange Trading
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