3 January 2001, 12:34 Forex: Euro marches on in early London trade after U.S. stock markets tumble
LONDON (AFX) - The euro marched on in early trade, firmly above the
0.95 usd mark with the falls on U.S. equities markets further denting
the dollar amid growing signs that the U.S. economy is heading for a
hard landing.
Sharp overnight falls on Wall Street greatly affected dollar
sentiment which had already been weakened by a very poor NAPM reading
for December.
Divyang Shah, economist at IDEAglobal.com believes the euro will
reach 0.9660 levels within the next few sessions on the back of the
gloomy outlook for the U.S. economy.
"The market is starting to price in an early rate cut in the U.S.,
perhaps as soon as this Friday," he said.
While pre-emptive, the move, if it comes, is unlikely to halt the
euro's ascent for long. Any correction, the euro has seen has been "
very shallow", he said.
The euro is benefiting from good hedging demand while speculative
accounts are following rather than leading the trend, he noted.
The dollar may come under further pressure when the U.S. labour
market report is released on Friday, he added.
Sterling also moved higher against the dollar, breaking the 1.50
usd mark in convincing fashion after flirting with that level for
several days.
The yen was weaker against most majors, troubled by concerns over
the possibility of corporate failure. It was rangebound against the
dollar.
"It remains to be seen how Japanese players will react when they
come back from holiday tomorrow," Shah said.
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