The dollar strengthened against the euro yesterday and has continued to gain ground to hit a 1-week high in early trade this morning, on the back of a fall in global equities, among those Tokyo's Nikkei which lost 2.8 percent. Many analysts are predicting that the euro/dollar pair could hit 1.30 by the end of the week if equity markets continue to fall.
The euro was also undermined by data released yesterday which showed that the eurozone economy recorded its largest ever quarterly fall in the fourth quarter of 2008. Additionally, Ireland released their budget plan yesterday which indicated the creation of a toxic assets agency. This resulted in a weakening of the euro and prompted investors to flock to the safe haven of the US dollar, despite the current grim state of the US economy.
Investors are also reluctant to buy riskier currencies at the moment due to the upcoming release of US corporate profits, which are expected to show a fall of approximately 37% in first quarter earnings for S&P 500 Companies.
This morning, Germany released their trade balance figures which were better than anticipated, however despite this the dollar has continued to rise against the euro. Germany will also be announcing Factory Orders at 11.00 BST. In the US, MBA Mortgage Applications will be announced at 12.00 BST. Also of particular interest will be the release of the FOMC Minutes in the US at 19.00 BST, which are released by the Board of Governors of the Federal Reserve and indicate future US interest rate policy.
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