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The euro dollar rallied and was the best-performing G10 foreign currency for a second day on Wednesday upon reports of reserve managers building up the euro in addition to rumors that the hawkish frontrunner to restore Jean-Claude Trichet may step down. The New Zealand dollar ended up being the laggard soon after Finance Minister Bill English cautioned of a double-dip economic downturn.
The euro carries on to rally, attaining greater than one hundred pips against the U.S. greenback on the day, however the fundamental underpinnings are deficient. Germany’s trade surplus was a touch softer than estimated in the only news of the day and periphery yield spreads climbed in an indication of rising tension.
The solitary news point was a report from Bloomberg that Bundesbank president Axel Weber said he intends to step down later this year. Weber became a favorite to replace Trichet when his term comes to an end. This may have offered the euro a lift considering that Weber is probably the world’s most hawkish central banks and there are now higher prospects pertaining to long term rate hikes.
English undercut the NZD soon after stating New Zealand could possibly drop back into recession. The overall economy contracted 0.2% in the third quarter and current Q4 signals have indicated a downhill trajectory. “It’s possible because the economy has been flat, people have been saving harder and paying off debt quicker than we thought,” English said today in Wellington. “They are not rushing back to the shops and they’re not rushing back to the housing market.”
Federal Reserve Chairman Ben Bernanke testified to the House Budget Committee although his views seemed to be mostly unchanged from remarks a while back. Some industry watchers noted that he seemed to be a touch more positive, while he neglected to repeat that it’s going to require 4-5 years to get the unemployment rate back to normal levels. He also said that the latest data “do provide some grounds for optimism.” Content provided by AroundFX.com
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