US Dollar tumbles as economic recovery slows

The Dollar has suffered as another wave of disappointing data hits the US. On top of this, negative manufacturing data came out from several of the world’s largest economies causing some economists to re-think whether there is any chance of a double dip recession.

Pound Sterling – UK Markets

The Pound has gained ground on the US Dollar with the Sterling to Dollar rate being 1.5194 at 10.30 am this morning. Manufacturing data released in the UK yesterday came out as slightly lower than last month but in general was still a sign of a healthily recovering economy. Yesterday however the Bank of England warned home buyers that it will be more difficult to obtain a mortgage in the next quarter as lenders anticipated a tightening in wholesale funding market conditions. Household demand for unsecured credit was reported to have risen in the second quarter for the first time in over a yea.

US Dollar – US Markets

The US Dollar has fallen following a flurry of negative news reports and data yesterday on the state of the economic recovery which seems to be slowing. Initial claims for US benefits have increased by 13, 000 over the past week as unemployment has remained stunted and payroll data due today is likely to decline by 130, 000. Furthermore, the removal of the home buyer tax credit has led to a 30 percent slump in sales of existing homes in the US. Whilst the Dollar is traditionally seen as a safe investment currency, this data has seen money flow out the Dollar and into other currencies.

Euro – European Markets

The Euro has also made gains on the US Dollar following the poor US data yesterday. The European Central Bank is lending 111.2 billion Euros to European banks for six days to help them cope with the expiry of their twelve month loans yesterday. Seventy eight banks asked for six day funds at the benchmark interest rate of 1 percent. Yesterday Spain successfully sold 3.5 billion euros worth of five year bonds at auction. This, alongside that the fact that the bank’s new three loan applications came in at a lower total than expected has helped renew confidence that the recovery may actually be taking place more smoothly than assumed.

Other Currencies – Highlights

Australia has solved their mining tax issue with the incoming new Prime Minster Julia Gillard successfully negotiating this down to 30 percent. The resolution of this issue has boosted demand for riskier assets causing the Japanese Yen to fall against sixteen of its major counterparts. For a live quote or to tell us about your foreign exchange requirements, please call us on +44 (0)20 7740 0000