The US dollar strengthened over the euro by 1.27 cents yesterday to close the day at 1.2690. However, early in the day's trading the euro had shown good strength and reached a high of 1.2990 off news that the US government may take up to a 40% stake in Citigroup. Analysts took this as a suggestion that the US government would not allow another bank to fail and consequently improved risk appetite amongst investors saw demand for the dollar as a safe haven fall. However, in later trading comments from ECB President Trichet about the severe pressure that European banks now find themselves under saw the euro heavily sold. This was compounded by news that ratings agency Fitch was concerned about Austria's AAA credit rating.
In today's trading the euro has strengthened back against the dollar despite the announcement of slightly worse than expected German IFO Business Climate and Expectations data, which are business sentiment indices. Later today eurozone Industrial New Orders figures are released, whilst in the US the Richmond Fed Manufacturing Index, ABC/Washington Post Consumer Confidence survey and S&P/Case-Shiller Home Price Index are all announced as well as a speech from Fed Chairman Ben Bernanke.
EURUSD: 1 week chart. Please click on graph to enlarge.
EURUSD: 1 week chart. Please click on graph to enlarge.
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