New High for the Euro

The Euro flew to a new high against the US Dollar, pushing over the 1.3300 level on its way to 1.3338 before settling down for the weekend at 1.3310. If this trend continues, it’s possible that the EUR/USD pair will break the 2006 high of 1.3348. While there appeared to be no definitive reason for the push, one possible contributor was the long-term Euro bullish implication of rising labor costs in the Euro-Zone. This is likely to force European monetary authorities to remain vigilant in their fight against inflation, and will most likely force the authorities to consider further rate hikes in the upcoming months. On the US side, a weak manufacturing sector survey from the Philadelphia Federal Reserve showed very unconvincing numbers. Combined with the largest month-over-month decline in Empire Manufacturing readings, these results suggest that the contraction in housing may be moving into other parts of the US economy. Former Fed Chairman Alan Greenspan seemed to confirm this possibility with his comment that subprime rates may have a larger-than-expected impact, warning that rising defaults in subprime mortgage markets could spill over into other parts of the economy. Other crosses like the USD/CHF hovered around 1.2110 before sliding to 1.2030. GBP/USD broke a range that has been in place since the beginning of the month, but did not produce a new low for the year. As we head into the weekend, the Dollar is holding at 116.73 against the Yen and .6970 against the New Zealand Dollar. Have a great weekend!

David Hilgeman, XPRESSTRADE Analyst