Euro Gains on Positive Data

_The euro made gains on the US dollar as better than expected economic data from the Eurozone showed that growth returned to the two largest European economies, Germany and France. The dollar was also pressured by demand for higher yielding assets. The results of the FOMC meeting showed that the recession in the US may be nearing its end sparking demand for high yielding currencies such as the Aussie and Kiwi dollars. As many experts expected the Fed will keep rates near zero in an attempt to spur recovery.

Eurozone to Return to Growth in

2010

In its monthly bulletin the European Central bank said that the Eurozone economy would return to growth in 2010. The euro/dollar exchange rate was up 0.5% to $1.4270 and the euro rose 0.8% against the yen to 137.49. Many currency strategists believe further euro gains are unlikely for now.  Adam Cole of RBC Capital Markets in London stated, “What we really need to see for the euro to run any further is some evidence from leading indicators that growth is actually turning positive at the moment. So there is a limit to how far it can run until we get some convincing evidence that Q3 is likely to be positive.”

Aussie and Kiwi Dollars Gain

Both the Aussie and Kiwi dollars rebounded from recent losses and the Aussie dollar rose 1.2% to $0.8419 while the Kiwi gained 0.9% and traded at $0.6761. While risk sentiment has improved some remained cautious about the Fed’s decision to extend asset purchases and believe the action shows that the US economy is still vulnerable. Many forex traders and investors are awaiting U.S. retail sales data. Stuart Bennett of Calyon in London said, “If the market decides to buy the USD on the back of the more upbeat headline, we could see a similar USD rally as after last Friday’s employment report.”

Fed Won’t Raise Rates Until 2010

A survey taken by Reuters showed that a majority of dealers expect the US recession to end this quarter and do not expect the Fed to raise rates until 2010.