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Why The Dollar Could Head Higher

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TODAY'S BIGGEST PERCENTAGE MOVERS

THE STORIES IN THE CURRENCY MARKET

EXPECTATIONS FOR UPCOMING FED MEETINGS

CURRENT US INTEREST RATE: 0.25%
11/02 Meeting 12/13 Meeting
NO CHANGE 68.3% 63.7%
CUT TO 0BP 31.7% 32.6%
HIKE TO 50BP 0.0% 0.7%

WHY THE DOLLAR COULD HEAD HIGHER

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EUR: GREECE STILL TEETERING AT THE BRINK OF DEFAULT

GBP: LIFTED BY STRONGER HOUSING DATA

The British pound strengthened against the greenback and the euro as the British Bankers' Association reported a better-than-expected figure for new mortgage approvals. There were 35.2K new mortgage approvals in August versus 33.2K expected and following 33.4K in July. The banks' new mortgage lending has increased in the past few months as a result of higher demand, and some business sectors are edging towards year-on-year borrowing growth. Although, the general landscape is still one of households not wanting to take on more borrowing and businesses waiting for industry conditions to improve before borrowing to expand or invest. Against this backdrop, paying down existing debt was the main contributor to the net lending figure. U.K. Chancellor of the Exchequer George Osborne said his deficit-reduction plan can survive the economic slowdown. Speaking to reporters in Washington today, he said the monetary policy and the automatic stabilizers – the lower tax burden and higher spending on welfare that happens during periods of weakness – would support the economy. However, the U.K. economy faces no growth and rising unemployment, which are very bad for deficits. Additionally, the world economy is not providing any assistance as it teeters with the possibility of extremely slow growth. This has caused Bank of England officials to consider restarting their bond-purchase program. Economic releases in focus next week include the nationwide housing price index, GfK consumer confidence, Bank of England credit conditions survey, and CBI retail sales figures. Particular emphasis is on the house price index which is expected to show an increase of 0.2 percent after turning negative in August.

NZD: EXTENDS LOSSES AS COMMODITY PRICES TUMBLE

JPY: FLIRTING WITH INTERVENTION LEVELS

The Japanese yen traded lower versus all of the major currencies today except the Canadian and New Zealand dollar. The volume of risk trades picked up after G20 pledging to stabilize the global economy. The strength in yen has been haunting the Japanese economy as it tries to recover from the Fukushima nuclear crisis. With profit margin thinning, major manufacturers are prompted to restructure domestic operations and to invest oversea. The latest trade deficit published on Tuesday indicated the growing woes for the exporters. The Japanese Finance Minister Jun Azumi warned on Thursday: "the yen remains at high levels, being sought mainly on external factors. That may serve as a drag on Japan's economy." Meanwhile, the Bank of Japan Governor Masaaki Shirakawa kept alive expectations of further monetary easing. According to a survey done by Yomiuri Shimbun, more than 80 percent of the companies are concerned about the continued appreciation of the yen. Furthermore, 60 percent of the respondents stated that their business performance was affected by the recent strength in yen. Looking ahead to next week, we have the retail sales on Wednesday and manufacturing PMI on Thursday, followed by CPI and industrial production data. If there were more signs of weakening in retail and manufacturing sectors, it could be only a matter of time before more easing measures implemented by BoJ.

EUR/USD: Currency in Play for Next 24 Hours

EUR/USD will be our currency pair in play for Monday. We expect German IFO Business Climate from Europe at 4:00 AM ET/ 8:00 GMT. From the U.S., there will be new home sales at 10:00 AM ET/ 14:00 GMT.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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