The dollar held its ground against its peers today on thin volume traded following a slash in growth expectation and forecasts for inflation by the Bank of England while remarks from the Japanese government reduced chances of a general election to be held in December. In a trading day without key US economic indicators dollar demand was supported by weak European industrial production figures.

 

The euro weakened against the dollar after Eurostat released figures falling short of forecasts for a 1% increase which revealed that euro zone industrial production only grew by 0.6% in September after a drop of 1.4% in August. The discouraging data added to dampening outlook for economic growth following poor data released on Monday which highlighted that Italy could be headed back to recessionary territory. The euro was stronger against the pound and weaker against the yen.

The pound weakened against the dollar with the pair revisiting 26 month lows following an announcement from the Bank of England stating its prediction that it will take about 3 years to reach its 2% target for inflation and that inflation will drop below 1% within the next 6 months. Lagging global growth and sharp decreases in commodity prices were the reasons the bank gave for increased risk of deflation. UK jobless claims dropped by 20,400 for October and the UK unemployment rate remained at 6% for the 3rd quarter.

 

The yen strengthened against the dollar with the pair coming off its 7 year high set yesterday. The yen was supported by remarks made by a spokesperson for the Japanese government who stated that the decision on when to call elections is that of the prime minister. The yen had weakened yesterday on talk of the possibility that Prime Minister Abe could call an election in order to push his reforms which call for a weaker yen.

 

The Australian, New Zealand and Canadian dollars strengthened considerably against the dollar. The Canadian dollar was supported as investors looked to towards a review of fiscal and economic conditions by the Canadian government which was predicted to reveal a minimal budget surplus.

 

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