Euro Falls Against Dollar

The strongest statements have come from ECB official Ewald Nowotny, who recently said that current policies were insufficient in the fight against weak growth and inflation. Employment missed expectation but unemployment rate stayed at 6.2% due to a decline in the participation rate.

As is typically the case in the days ahead of an European Central Bank rate decision, the Eurozone economic data calendar is relatively light this week, but does include what could be a significant release Friday (starting at 09:00 CET) from Markit Economics in the form of flash manufacturing and services PMI readings for the month of October. A slight majority of economists in the poll seem to share that assessment. For the month of October, the dollar index so far was down 1.7 per cent, although year to date, the greenback was still up 4.9 per cent. The Reuters calculation for the aggregate United States dollar position is derived from net positions of global Monetary Market speculators in the yen, euro, British pound, Swiss franc and Canadian and Australian dollars.

The dollar climbed to an early high of USD1.1335 against the Euro Friday, but has since retreated to around USD1.1380.

The dollar firmed for a second straight day Friday as the outlook for a Federal Reserve interest rate hike this year remained murky. It had got raised concerns from a poor run of US indicators and worries regarding the slowing economic condition in China, which is discouraging the likelihood of a raise in the interest rates.

The question also starting to haunt markets is what more can be done to stimulate growth when even major euro zone economies such as Germany are turning out poor data. Imports rose a bit, meaning the seasonally adjusted trade surplus narrowed slightly compared with July’s record high level.

The Dow Jones industrial average rose 74.22 points, or 0.43 percent, to 17,215.97, the S&P 500 gained 9.25 points, or 0.46 percent, to 2,033.11, and the Nasdaq Composite added 16.59 points, or 0.34 percent, to 4,886.69.

Poland’s central bank chief, Marek Belka, said the European Union doesn’t face a catastrophe now but a collapse of its single-currency area would be a catastrophe. The euro dropped one cent from this news and is now trading at $1.4721 Canadian.

The European Central Bank could cut its deposit rate further, probably weakening the euro, but the benefits would be far outweighed by the loss of credibility associated with breaking its forward guidance that rates have hit bottom, analysts say. But the Irish economy is roughly just one-twentieth the size of Germany’s and Spain is about one-third.