Tuesday, 18 Aug 2009

Risk Appetite Dampens over Poor U.S Economic Data

Today's early trading witnessed a modest return of risk appetite after surprisingly strong U.K. inflation data and a very optimistic reading of German economic confidence. The Pound and Euro gained strength against the Dollar and Yen with the GBP climbing to a high for the day of $1.6468 against the Dollar and the EUR rising to $1.4142 and to ¥134.70.

The Pound's move came after a report showed that U.K. consumer prices rose at an annual rate of 1.8% in July, beating economists' expectations of 1.6%. Shortly afterwards, data showed Germany's ZEW Economic Expectations Index rose to 56.1 for August, marking the highest level since April 2006.

The release of the U.S economic data at 12:30 GMT proved to be less optimistic with Housing Starts unexpectedly falling. Building Permits also unexpectedly fell in July. Wholesale prices in the U.S. fell more than forecasted in July. The poor economic data from the U.S dampened risk appetite and pushed the Dollar higher versus its riskier counterparts, with the EUR trading at $1.4080 and the Pound at $1.6420. Crude Oil was also hurt by the news with prices reaching close to $68.00 a barrel.