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Euro slips against dollar on US contraction news
Euro slips against dollar on US contraction news
NEW YORK (AFP) – The euro slipped against the dollar Thursday after government data showed the US economy contracted less than expected in the third quarter amid global financial turmoil.
The euro was trading at 1.2881 dollars around 2200 GMT, down from 1.2971 dollars late Wednesday in New York.
The dollar rose to 98.76 yen from 97.34 yen.
The decline in the euro against the dollar followed two days of strong gains. Under 1.25 dollars at the start of the week, the euro had climbed to 1.32 dollars in Asian trade Thursday before reversing course.
"The EURUSD's bullish rebound seems to have run out of steam for the time being.
Resistance around 1.33 proved significant enough for the market to reevaluate the strength of any counter-trend moves when the dominant trend has been so prevalent for months," said John Kicklighter, analyst at Forex Capital Markets.
The US Commerce Department said gross domestic product (GDP) in July-September period shrank by a 0.3 percent annualized rate, less than most analysts' forecasts of negative growth of 0.5 percent.
"The data suggests that the world's largest economy is headed for a recession, which could force the Fed to lower the benchmark interest below the 1.0 percent level for the first time in history," said David Song at Forex Capital Markets.
The GDP data came a day after the Federal Reserve slashed its key interest rate by a half point for the second time this month, to a historic low of 1.0 percent, and signaled more rate cuts were likely.
In Europe, "investors speculated that lower borrowing costs would boost global economic activity," said Zach Witton at Economy.com.
Joshua Raymond, City index market strategist, said there were now "clear indications from the Bank of England and Jean Claude Trichet (head of the European Central Bank) that rate cuts are on the cards next week.
"We are expecting an aggressive rate cut for the recession-entrenched UK, especially following the greater than expected contraction of (US) GDP. However, this is by no means a certainty."
However, many analysts said the data indicated the US economy was entering a deep recession -- and offered little hope of an early improvement.
"What is noticeable is that the US economy is hanging onto support from exports (and) that will not last in the fourth quarter," said Avery Shenfeld, economist at CIBC World Markets.
"The rest of the world is slowing and the rising dollar will take some of the shine off exports. The fourth quarter is going to be much worse, with a decline of perhaps as much as two percent."
Dealers said the dollar's gains were thus largely technical after its recent losses against the euro.
"The dollar is regaining traction after the recent correction. Flows rather than a fundamental shift in outlook triggered the dollar's recent decline," said Audrey Childe-Freeman at Brown Brothers Harriman.
In late New York trade, the dollar surged to 1.6399 Swiss francs from 1.1307 late Wednesday.
The pound was at 1.6399 dollars, compared with 1.6373.
NEW YORK (AFP) – The euro slipped against the dollar Thursday after government data showed the US economy contracted less than expected in the third quarter amid global financial turmoil.
The euro was trading at 1.2881 dollars around 2200 GMT, down from 1.2971 dollars late Wednesday in New York.
The dollar rose to 98.76 yen from 97.34 yen.
The decline in the euro against the dollar followed two days of strong gains. Under 1.25 dollars at the start of the week, the euro had climbed to 1.32 dollars in Asian trade Thursday before reversing course.
"The EURUSD's bullish rebound seems to have run out of steam for the time being.
Resistance around 1.33 proved significant enough for the market to reevaluate the strength of any counter-trend moves when the dominant trend has been so prevalent for months," said John Kicklighter, analyst at Forex Capital Markets.
The US Commerce Department said gross domestic product (GDP) in July-September period shrank by a 0.3 percent annualized rate, less than most analysts' forecasts of negative growth of 0.5 percent.
"The data suggests that the world's largest economy is headed for a recession, which could force the Fed to lower the benchmark interest below the 1.0 percent level for the first time in history," said David Song at Forex Capital Markets.
The GDP data came a day after the Federal Reserve slashed its key interest rate by a half point for the second time this month, to a historic low of 1.0 percent, and signaled more rate cuts were likely.
In Europe, "investors speculated that lower borrowing costs would boost global economic activity," said Zach Witton at Economy.com.
Joshua Raymond, City index market strategist, said there were now "clear indications from the Bank of England and Jean Claude Trichet (head of the European Central Bank) that rate cuts are on the cards next week.
"We are expecting an aggressive rate cut for the recession-entrenched UK, especially following the greater than expected contraction of (US) GDP. However, this is by no means a certainty."
However, many analysts said the data indicated the US economy was entering a deep recession -- and offered little hope of an early improvement.
"What is noticeable is that the US economy is hanging onto support from exports (and) that will not last in the fourth quarter," said Avery Shenfeld, economist at CIBC World Markets.
"The rest of the world is slowing and the rising dollar will take some of the shine off exports. The fourth quarter is going to be much worse, with a decline of perhaps as much as two percent."
Dealers said the dollar's gains were thus largely technical after its recent losses against the euro.
"The dollar is regaining traction after the recent correction. Flows rather than a fundamental shift in outlook triggered the dollar's recent decline," said Audrey Childe-Freeman at Brown Brothers Harriman.
In late New York trade, the dollar surged to 1.6399 Swiss francs from 1.1307 late Wednesday.
The pound was at 1.6399 dollars, compared with 1.6373.
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