Daily Insight

The Dollar found some tentative support against the Euro yesterday, firming a surprising 0.4% by the close last night after falling to a new 20-month low earlier in the session. There was a host of significant economic data released in the States yesterday as a report on U.S GDP showed that the economy expanded at a revised 2.2% year-on-year in the three months through to September. Although U.S growth is still under the 2.6% seen in the second quarter, the revised estimate in the third was significantly higher than the 1.8% forecast in October and supports the Fed's view that the U.S economy will continue to expand at a moderate rate. Elsewhere, the Dollar came under increased pressure against the Pound, falling to the lowest level since September 1992 overnight to trade above the resistance level around 1.9548.

A separate report on the U.S housing market showed that the sales of new homes fell by more than expected in October, which will only fuel speculation that the housing slump is still gathering momentum. Even the chairman of the Federal Reserve, Ben Bernanke, couldn't halt the Dollar's rapid decline against Sterling as the market ignored his comments over the prospect of higher interest rates as he stated in New York that U.S inflation still remained at an "uncomfortably high" level. In terms of economic data, the Dollar may come under further pressure this afternoon with the release of the Fed's preferred measure of U.S inflation as the report on personal income and expenditure is widely expected to remain unchanged in October, while the Core PCE Deflator may fall from 0.2% to 0.1%.

The Euro continued to slide against the Pound yesterday amid a distinct lack of economic data released in the Euro-zone. The single currency failed to make any gains despite comments from ECB policy makers including the chairman Jean-Claude Trichet, who seem unconcerned with the Euro's recent strength and the potentially damaging effect on European exports. There is a host of economic data released this morning as German unemployment fell in November and it seems likely that Europe's largest economy will be able to supplement the introduction of the 3 percentage point tax increase at the start of next year. The Euro may make further gains against the Dollar this morning following the release of the revised estimate for European economic growth in the third quarter, which is widely expected to remain unchanged at 2.6% despite a series of rate hikes this year. Elsewhere, the Flash estimate of consumer price inflation may show an increase from 1.6% to 1.8% in November, which suggests that the ECB will need to continue raising interest rates.

Data Released 30th November

UK 10:30 Consumer Confidence (November)
UK 11:00 CBI Distributive Trades Balance (November)

EU 10:00 Flash Consumer Price Inflation (November)
EU 10:00 GDP (Q3 Revised)
EU 10:00 EC Sentiment Index (November)
- Industrial / Consumer Confidence

U.S 13:30 Initial Jobless Claims (w/e 25th November)
U.S 13:30 Personal Income / Expenditure (October)
- Core PCE Deflator
U.S 15:00 Chicago PMI (November)

written by Adam Solomon