The US Dollar lost ground to the Euro and the British Pound in overnight trading as Asian stock markets registered substantive gains, pointing to improved risk appetite. Japanese data continued to reflect deepening recession and it has shown producer inflation slow over 62% since peaking in August as commodities tumbled and global economic activity turned increasingly sluggish.
The EUR experienced a bullish trading session yesterday, as it appreciated against most of its major currency pairs. Outside of Euro-Zone economic news, Britain experienced further negative news. These past weeks, the UK has been provided with a stream of data which has pushed the Bank of England (BoE) closer to adopting the EUR as its official currency. Coupled with the possibility of other countries, such as Iceland, Bulgaria, and other East European countries, also joining the EUR, investors may see a sudden reemergence of the EUR as a powerful currency capable of becoming the main contender with the USD as the safest safe-haven.
A busy economic calendar lies ahead in European trading hours but traders are unlikely to see anything that does not fit with themes already priced into exchange rates. Risk trends remain the dominant force driving forex price action. Asian stock markets registered substantive gains in overnight trading and US index futures are up well over 1% ahead of the opening in Europe, suggesting capital will continue to flow out of safe haven assets and pressure the US Dollar lower.
