Narrower Trade Deficit Pressures Dollar

The US dollar declined for the second day in a row vs. the euro as a narrower-than-expected U.S. trade deficit for October and much improved jobless claims doused demand for safe haven assets. The Euro’s gains were capped by investor concerns about the fiscal health of both Greece and Spain. On Wednesday Standard & Poor’s said Spain’s credit outlook is negative. On Tuesday Fitch cut Greece’s rating sparking debt concerns. Jacob Oubina of Forex .com stated, “The continuing claims rolled off quite a bit, and they came in about almost 300,000 below what the market was looking for. And the trade balance in the U.S. also improved considerably. A positive for the risk trade.” Against the dollar the euro was up 0.2% at $1.4758 and against the yen the dollar gained 0.3% trading at 88.45 yen.

Greek Concerns Will Not Split Euro Zone

ECB Governing Council member Ewald Nowotny said that worries about Greek finances would not split the Euro Zone. Johan Javeus of SEB in Stockholm said about the Greek situation, “The euro has probably taken a bit of a hit from these internal problems in the euro zone.”

Aussie Jobs Data Fuels Rate Speculation

Positive Australian jobs data fueled speculation that Australia’s central bank would raise rates. Earlier in the week the Reserve Bank of New Zealand said that New Zealand may raise rates sooner than anticipated. The Australian dollar gained 0.8% vs. the greenback trading at $0.9158 and the Kiwi dollar rose 1.2% to $0.7272. Some currency analysts speculated that markets may be changing from the recent trends of trading on risk sentiment to trading on fundamentals. You-Na Park of Commerzbank stated, “Interest rates are becoming a more important factor and the market is looking more at fundamentals now.”

BOE to Hold Rates Steady

The pound was up 0.4% against the dollar trading at $1.6316 and against the euro rose 0.3% to 90.26 pence. Earlier the Bank of England said they would hold rates at record lows of 0.5%.