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EUR continues to trade higher against the Pound and dollars

EUR continues to trade higher against the Pound and dollars

The euro is seen as the week’s biggest mover, as Draghi’s strong post-ECB comments sought to gain recognition for the easing of financial market pressures. At last Thursdays’ ECB meeting markets had been wary that ECB President Draghi would signal rate cuts in the coming months, but instead he gave no hint that they were contemplating a rate cut any time soon. This became a ‘buy’ signal for some investors with the euro leaping to its highest level against the USD since April 2012.

In the meantime disappointing UK data released on Friday indicated that Britain’s economy contracted in the last three months of 2012, compounding difficulties for a government struggling to dig itself out of a deep budget deficit. After another sluggish run of industrial output and a sharp fall in construction, the National Institute of Economic and Social Research calculated the economy had shrunk 0.3 % in the fourth quarter of 2012. Official figures are due on January 25.

On the other hand retail sales in the US rose in December as Americans wrapped up their holiday shopping and car dealers closed out the best two months since 2008, economists said before a report this week. The 0.2 per cent increase would follow a 0.3 per cent gain in November, according to the economist. In the meantime the U.S. economy is also expected to grow by 2.5% in 2013, improving to 3.5% growth in 2014, top Fed official Charles Evans.

On the FX markets, the EUR picked up against the dollar and pound following Draghi bullish comment. GBPEUR pair trading at a range of 1.2050- 1.2077 and EUR/USD rose to $1.3365. GBP/USD slipped below the $1.61 level on Friday but recovered during the day and is currently trading at the $1.6120 level.

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