Euro worries add to Chinese policy threat

Canadian dollar – The Canadian unit continues to decline more so on growth concerns than when it rallies as risk aversion is cast aside. As yet there are few clues over how long this situation will last nor what the outcome will be. It’s difficult at present to predict the next break in either direction given resilient economic optimism pitted against the potential for ongoing corrective price action for commodities. The Canadian sagged Friday against the greenback to buy $1.0365 U.S. cents.

British pound – The pound’s earlier advance wilted and the unit is back to unchanged on the session at $1.6350. In a Bloomberg television interview Bank of England policymaker Andrew Sentance warned that the recent dip in inflation may well prove to be short-lived. He said that he wouldn’t turn his nose up at a currency-boosting rate increase given inflation is yet expected to reach 5% later in the year. The euro shed some ground against the pound and last bought 88.40 pence.

U.S. Dollar – The dollar index continues its acceleration away from a 16-month low induced by fears that the Fed is unlikely to respond to what it sees as transitory inflationary pressures. The situation seems destined to remain that way unless commodity prices correct further in coming weeks following a spate of warnings over the likely harm rising prices will thrust on consumption and inflation. The index gained to 78.80 as the dollar made headway against a deficit-riddled euro, the beleaguered yen and a pair of out-of-favor commodity dollars. Later on Friday the dollar does battle with a slew of data including consumer price and industrial production.

Andrew Wilkinson is a Senior Market Analyst at Interactive Brokers LLC

Note: The material presented in this commentary is provided for informational purposes only and is based upon information that is considered to be reliable. However, neither Interactive Brokers LLC nor its affiliates warrant its completeness, accuracy or adequacy and it should not be relied upon as such. Neither IB nor its affiliates are responsible for any errors or omissions or for results obtained from the use of this information. Past performance is not necessarily indicative of future results.

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About the Author
Andrew Wilkinson

Andrew is a seasoned trader and commentator of global financial markets. He worked for several London-based banks trading cash and derivatives before moving to the U.S. to attend graduate school. Andrew re-joins Interactive Brokers following a two-year stretch at a major Wall Street broker-dealer as their Chief Economic Strategist. His coverage of stocks, options, futures, forex and bonds regularly surfaces in global media, and over the last several years Andrew has made many TV appearances on Bloomberg, BBC, CNBC and BNN and Yahoo Finance.

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