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Euro Dollar Fundamental News – 27th February 2009

As equity markets extend their short term rally, and the currency markets continue to exhibit abnormal behaviour across all the majors and some of the crosses, today’s lack of news is hardly likely to help! The professional traders that I speak to on a daily basis are increasingly standing back from the euro to dollar market, which continues to move in an unpredictable way intra day, yet consolidating all the while into a falling wedge, or sideways pennant, depending on your viewpoint and timescale. With little news out today of any significance we can expect more of the same, particularly with the weekend ahead and traders ( such as there are ) squaring off positions. Trading volumes are often thin on a Friday adding to the volatility in the markets.

So far this morning in Europe we have had the German Preliminary CPI data ( which came in at 0.6% against a forecast of 0.3% ), the European CPI figures for both Core ( 1.6% against a forecast of 1.8%), General CPI ( bang on forecast at 1.1%), and finally the Unemployment Rate which came in at slightly over forecast at 8.2% ( forecast 8.1%). With a mixture of good and bad figures here, the euro to dollar initially fell, and has since rallied slightly to it’s current level of 1.2658.

The only significant fundamental news out today is in the US at 1.30 UK time, and these are the Preliminary GDP figures. These are prepared by the Bureau of Economic Analysis and measure the annualized change in the value of all goods and services produced by the economy. If the actual is better than forecast then this is generally good for the US dollar. The numbers are released quarterly, about 60 days after the end of the period, and whilst it is a quarterly report, it is actually provided in an annualized format. In other words the data sets are multiplied by¬† four. As you may know, there are three versions of GDP released a month apart, namely the Advance, the Preliminary, and the Final. The Advance release is the earliest and thus tends to have the most impact, but even so these figures will move the currency once released as they provide a broad measure of economic activity and the primary gauge of the nation’s health ( or not in this case!)