Another night of pain for dollar bears as the greenback once again reaffirmed its status as the current king of the hill in the FX markets gaining strongly across the board buoyed by continued declines in oil and gold prices. Gold dropped below800 pressuring the Australian dollar which was also affected negatively by lower than expected GDP results which came in 2.7% versus 2.9% projected. The Aussie fell to 8235 in overnight trade losing another 100 points to the buck before recovering by North American open.
However it was the pound that continued to feel the full brunt of the dollar rally hitting a 2 ½ year low as it plunged below the 1.7700 at one point in early London trade. Ironically enough the economic data from UK was actually surprisingly positive with consumer sentiment rebounding to 52 from 49 expected while services PMI reading was considerably better rising to 49.2 from 47 forecast. Nevertheless on balance the UK data continues to reflect serious deterioration in the country's economy and trades anticipate lower rates from the BoE in the near future.
The key question going forward is will the BoE accede to political pressures and lower rates at tomorrow's MPC meeting? For now the market consensus calls for no change with rates remaining at 5.00%.
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