The dollar soared over 1% strengthening to a 4 year high against its peers on Friday on the back of solid US economic data which generated a positive outlook for the state of the US economy. US consumer sentiment index reported by the University of Michigan jumped to a 7 year high in October while pundits forecast the index to the remain the same as September. In a separate report the Chicago purchasing managers’ index climbed to a 3.5 year high in October well above forecasts. This data caused the market to overlook figures released previously which revealed that personal spending dropped by 0.2% in October after an increase of 0.1% was expected.
The pound weakened against the dollar due to dollar demand being supported by favorable US economic data. The pound was stronger than the euro.
The euro weakened against the dollar with the pair reaching 26 month lows following the release of data out of the euro zone which revealed that consumer price inflation increased at an annualized rate of 0.4% which was on par with forecasts for this month. The European Central Bank has set a target of around 2% for inflation but the rate has been under 1% for 13 months in a row. An additional report revealed that the unemployment rate for the euro zone remained at 11.5% from last month. German retail sales slumped 3.2%.
The yen weakened to new 7 year lows against the dollar with the pair surging passed its 112 handle following an announcement from the Bank of Japan which took the market by surprise by suddenly implementing additional stimulus measures. The yen faced pressure to sell as the BOJ indicated it would increase its monetary base target by over Y10 trillion to reduce risk of not reaching its target for inflation.
Commodity associated dollars such as the Australian, New Zealand and Canadian dollars were widely weaker than the US dollar. The Canadian dollar lost ground against the dollar following figures released by Statistics Canada which revealed that Canada’s GDP shrunk by 0.1% in September while figures were expected to be unchanged.
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