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
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