The dollar strengthened against its peers today trading at new 9 year highs following data which revealed that US private sector employment increased above expectations, adding to positive outlook regarding prospects for the US labor market. ADP reported that non-farm private employment increased by 241,000 in December while an increase of 226,000 was forecast. The Fed announced that it will continue with its plan to start increasing rates later this year.

The euro weakened to new 9 year lows against the dollar following data which revealed that euro zone consumer prices declined in December after more than 5 years of consecutive increases. Eurostat released figures highlighting euro zone inflation dropping at an annual rate of 0.2% in December from 0.3% in November while experts forecast an annual decline of 0.1%. Core inflation increased by 0.8% on a year over year basis however was still far away from the European Central Bank’s target of around 2%. The data generated speculation that the ECB will introduce stimulus measures as early as its January 22 meeting.

The pound weakened against the dollar to new 17 month lows as the market anticipates that the Bank of England will keep rates unchanged for the majority of this year. The pound continued to be pressured by weak data released yesterday and the day before highlighting a drop in UK construction PMI and services PMI. Markets were also on edge as Greece’s euro zone status appears to be in question given current political turmoil.

The yen weakened against the dollar as safe haven demand for the yen was diminished following gains in Asian equity markets overnight which highlighted the market bouncing back from the selloff earlier on this week.

Commodity associated currencies such as the Australian, New Zealand and Canadian dollars stayed at multi-year lows against the dollar, still facing pressure as a result of falling oil prices.

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