The USD falls to its lowest point versus the Euro
The sharp fall of the USD in relation to the Euro was caused by the worries concerning the US mortgage market and its consequences for the country economy.
The intention of the US government to provide some emergency assistance to large mortgage companies – Fannie Mae and Freddie Mac caused sharp decrease of the confidence in this market and the hike of the Euro to the point of $1.6038. Members of the market suppose that the assistance to the mortgage companies will be nothing but additional several billions of dollars that will increase the national debt and thus decrease credit rating of the whole country.
According to CMS Markets analyst James Hughes the announcement by the Fed in relation the assistance plan for mortgage lenders is still something ridiculous in the market. This statement has only emphasized the negative situation of the country’s economy.
Unstable situation at the market caused the growth of the Euro even despite the fall of German ZEW index and the British pound increased over the point of $2.00. Here we should also add that the Japanese yen increased to its month ago highs even despite the fact that the Central Bank of the Japan emphasized the necessity of remaining at the neutral position regarding interest rates. Therefore there isn’t anything new from Japan.
However the news are expected from the US where US retail sales and producer price index as well as Fed’s chairman report to the Senate Banking Committee are to be issued soon. It is expected that the Bernanke’s speech may turn to be positive for the market.
As for other news, the British pound is still high in relation to the USD caused by the high numbers of CPI report. The annual CPI rate increased to 3.8 percent in the previous month that was quite higher than the numbers forecasted by the experts.
Due to Daragh Maher a senior forex strategist at Calyon the British pound seems to remain at high positions in relation to the USD for a certain period of time. It is forecasted that the Bank of England will not decrease interest rates until the end of the year.
