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United States dollar continues to decline against euro

13 Janvier 2018

While some have speculated that yesterday's move was only a technical change the move sent a ripple through the bond markets, pushing yields up on United States treasuries and other bond markets as traders and investors re-adjusted their positions amidst a worry that they might be underestimating the pace at which central banks might look to withdraw stimulus in the coming months.

"The 2.5 percent level on the Treasury is a line in the sand so U.S. CPI (consumer price inflation) data tomorrow is going to be absolutely critical (for the dollar)", Saxo Bank's head of FX strategy John Hardy said, talking about the view that higher inflation will encourage more U.S. interest rate hikes. Sterling fell 0.5 cents to €1.1246.

Olivier Korber, a currency anaylst at Societe Generale in Paris, said a lot of bad news was priced into the pound and that its recovery in recent weeks - a 4.5 percent climb against the dollar - was mostly due to weakness in the USA currency.

In Paris, Sodexo tumbled 5.12 percent.

IG Group shares fell 3.08% to £755.00.

On Wednesday's trading session, the Euro to US Dollar exchange rate saw a minimal rise.

In 2018, the European Central Bank predicted a 2.3-percent growth, compared to 1.8 percent estimated in September, with an inflation of 1.4 percent, compared to 1.2 percent.

Eurozone industrial production grew the most in three months in November, Eurostat reported Thursday.

The euro was up 1.21 percent to $1.2177, on pace for its biggest single-day percentage gain against the greenback in more than six months.

Yet purchasing managers surveys showed that the eurozone economy ended 2017 with its strongest growth in seven years, driven by accelerating services and manufacturing activity across all major economies. The biggest euro area economy has expanded for the eighth year in a row.

But analysts also pointed to bullish underlying sentiment as a driver.

The dollar was also pressured by data on Thursday that showed US producer prices fell for the first time in almost 1-1/2 years in December, which could temper expectations that inflation will accelerate in 2018. Gross domestic product is likely to have expanded 0.6 percent in the fourth quarter, revised up from 0.5 projected earlier. China is the largest foreign creditor to the USA government, playing a significant role in the Treasury market.

Today's releases conclude both the United Kingdom and Eurozone data dockets for this week, leaving the GBP/EUR exchange rate to react to high-profile U.S. data tomorrow. Hong Kong's Hang Seng surged 0.9 percent to 31,412.54 and the Shanghai Composite index added 0.1 percent to 3,428.94. Price action is expected to see USDJPY eventually touch down to 110.70 in the near term, following the downside breakout from the triangle pattern on the daily chart.

United States dollar continues to decline against euro