The dollar strengthened surging to 11 year highs against its peers today as the euro plummeted leading up to the European Central Bank’s latest policy meeting which the market widely anticipated would result in the central bank outlining its stimulus program. The US Institute of Supply Management released figures which revealed that service sector output expanded above forecasts for February which increased predictions of the Fed raising its interest rate. The ISM non-manufacturing index ticked up from 56.7 in January to 56.9 in February beating forecasts of a decline to 56.5. The US private sector gained 212,000 jobs in February which was just shy of forecasts for an increase of 220,000.

The euro weakened against the dollar to its lowest level since August 2003 falling below 1.1100 as it was weighed down by significant pressure to sell. The euro tanked overlooking economic data which revealed that the euro zone services sector index rose from 52.7 in January to 53.7 in February. Separate figures revealed that euro zone retail sales increased considerably higher in January.

The pound weakened against the dollar to 2 week lows following the release of data which revealed that UK service sector activity wound down in February from January’s growth rate. The UK services index dropped from a reading of 57.2 in January to 56.7 in February while experts had forecast a reading of 57.5. The index’s reading of 50 separates growth from decline in the services industry. The pound was stronger against the euro setting a new 7 year high earlier in the session.

The yen strengthened slightly against the dollar with the pair trading in a tight range below its 120 handle. The pair has been stuck in a tight range of 200 pips between 118.30 and 120.30 for the last month only allowing investors to take advantage of short term movement. If Friday’s data out of the US posts solid job growth the yen should weaken as the market looks for a Fed rate increase in June and the pair could break above 120.30. Conversely the pair could drop back down to 118.30 on discouraging jobs data as predictions for the timing of a rate increase are pushed back.

The Australian, New Zealand and Canadian dollars strengthened against the dollar. The Aussie dollar was underpinned by 4th quarter GDP data which revealed that its economy expanded matching forecasts of up 2.5% on a year over year basis. The loonie was supported by an announcement from the Bank of Canada maintaining its interest rate unchanged at 0.75% after the central bank shocked the market by lowering its rate in January.

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