The dollar is currently gaining ground against the pound sterling and the Japanese Yen at the beginning of the new trading week, but is losing ground against the Euro. The stronger than expected October employment growth reported at the end of the previous week is continuing to drive the currency on Monday. Investors are speculating that the Federal Reserve may decide to begin tapering its stimulus measures sooner than previously thought, due to the strong data.
Investors will be watching some upcoming speeches for any clues regarding stimulus tapering. Federal Reserve Chairman Ben Bernanke is expected to speak Wednesday evening at a town hall meeting in Washington. Janet Yellen, who has been nominated as Bernanke’s replacement, is due to testify before the Senate Banking Committee on Thursday.
The low interest rate is an instrument to meet the price stability mandate, European Central Bank Executive Board member Benoit Coeure said in an editorial published Monday in Germany’s Handelsblatt newspaper.
Price stability is a prerequisite to shift the economy back to a sustainable path. “Higher interest rates would have exacerbated the recession, delaying the onset of recovery and contributed to deflationary risks,” he said.
Further, Coeure rejected criticism that the rate cut is hurting savers. The low interest rate regime is the result of the recent prolonged, deep recession and the fragmentation of financial markets in the euro area.
Last week, the ECB reduced its main refinancing rate by 25 basis points to record low 0.25 percent. Previously, the bank slashed the rate by a quarter-point in May, which was the first reduction in nine months.
The dollar reached an early high of $1.3344 against the Euro on Monday, but has since pulled back to around $1.3400.
The greenback traded around the $1.6020 against the pound sterling early Monday, but has since climbed to around $1.5975.
Optimism about the business situation rose at the fastest pace since records began in 1988 among U.K. small and medium-sized manufacturers, survey data from the Confederation of British Industry showed Monday.
Driven by robust domestic and foreign demand, the total new order balance rose for the first time since July 2012, to 17 percent during three months to October, the SME Trends survey revealed.
The buck dipped to an early low of Y98.914 against the Japanese Yen on Monday, but has since climbed back to around Y99.200.
Japan posted a current account surplus of 587.3 billion yen in September, the Ministry of Finance said on Monday, remaining in the green for the eighth consecutive month. The headline figure topped expectations for a surplus of 400.8 billion yen following the 161.5 billion yen surplus in August.
Japan’s economy watchers’ assessment of current situation weakened in October, while expectations improved for a second month, survey data from the Cabinet Office showed Monday. The indicator reflecting assessment of the current economic conditions slipped to 51.8 in October from 52.8 in September.
Total bank lending excluding trusts was up 2.3 percent on year in October, the Bank of Japan said on Monday, worth 407.750 trillion yen. That was in line with forecasts and up from the 2.2 percent gain in September following a downward revision from 2.3 percent.