US Dollar Rises on Safety Demand as China’s PM Wen Warns of “Double Dip”
Key Overnight Developments
• New Zealand Service Sector Gains Momentum on New Orders, Sales Growth
• UK House Price Growth Slows for First in Thirteen Months, Says Rightmove
• US Dollar Rises on Safety Demand as China PM Warns of “Double Dip”
The Euro and the British Pound declined to start the trading week, slipping 0.3 percent apiece against the US Dollar, with safe-haven flows boosting demand for the greenback as stocks declined on comments from Chinese Prime Minister Wen Jiabao, who was quoted in the China Daily as saying that his country may experience a “double dip” this year. We remain short EURUSD at 1.4881 and GBPUSD at 1.5765.
Asia Session Highlights
New Zealand’s Performance of Services Index climbed to 53.7 in February, showing the sector expanded at a faster rate compared with the previous month. An increase in new orders drove the metric higher while a gauge of sales activity also showed very strong results. The service sector makes up around two thirds of the economy, so strong demand here is an encouraging sign for the island nation’s ability to extend its economic recovery for a third consecutive quarter in the three months through December 2009. The report was not without its disappointments however as a sub-index tracking employment showed the pace of service-sector hiring slowed to the most sluggish in four months, which may bode ill for spending and private consumption, the largest component of overall economic growth.
A gauge of UK House Prices from Rightmove Plc, an online listing of for-sale properties, advanced 5.3 percent in the year to March following a 6.1 percent increase in February, marking the first slowdown in the annual growth rate in 13 months. The decline was liked to an influx of new sellers as the supply of available properties surged by the most in 18 months. Rightmove commercial director Michael Shipside said “restrained pricing is required as a direct consequence of buyers having more choice” but added that Rightmove “still expects further rises in the first half of this year when buyers have picked over the newly marketed stock.”
Euro Session: What to Expect
The fourth quarter Euro Zone Employment report is the only meaningful item on the economic calendar but traders are unlikely to be particularly interested considering monthly data has already been released through January, meaning the labor-market outlook that is likely to be suggested by today’s release has already been priced into the exchange rate.
Rather, risk sentiment is likely to dominate trade in European hours as it did in the Asian session. US equity index futures are trading deep into negative territory, down by nearly 0.8 percent, hinting that safety demand is likely to continue driving demand the US Dollar and the Japanese Yen at the expense of most of their major counterparts.
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