FX Roundup: Dollar, pound slide on lacklustre data

The dollar shed further froth in European trading on Tuesday, while the euro notched decent upticks over another slow pre-Christmas session in Europe.

The greenback’s correction follows survey data pointing to a decline in US economic activity declined in November. At 1438 GMT, the dollar shed another 0.20% against the yen changing hands at JPY120.95, with the Chicago Fed National Activity Index (CFNAI) at -0.30 in November, down from -0.17 in October.

Analysts had expected a reading of +0.10 for the survey published overnight. The drop was led by a fall in the production-related indicators on the CFAI to –0.27 in November from –0.11 in October.

Industrial production dropped 0.6% in November, compared to a 0.4% decrease a month earlier. Manufacturing production was unchanged in November, following an increase of 0.3% the previous month.

Elsewhere, National Association of Realtors data suggested that existing US home sales dropped 10.5% to an annual rate of 4.76m from a downwardly-revised 5.32m in October and compared with consensus estimates for an increase to 5.35m.

There were 2.04m available homes for sale, a 3.3% month-on-month decline, while the median price for a home rose 6.3% year-on-year to $220,300.

The euro also strengthened against the dollar changing hands at $1.0967, up 0.48%. However, the pound fell 0.35% exchanging at $1.4833 after the UK Office for National Statistics said the country's public sector borrowing rose £1.3bn to £14.2bn in November, from the same month last year.

The figure was far higher than the £11.8bn economists had been expecting. Kit Juckes, head of forex at Societe Generale, said: “The pound is one currency I remain wary of when I look ahead at US Federal Reserve / Bank of England decoupling, and the danger of UK growth losing some momentum with a slowdown in wages.

“I don't want to make too much of the slowdown in wage growth yet, but it's all a bit close to home as the construction sector booms and the finance sector heads in the opposite direction. Then, of course there's Brexit. This week all will be quiet and at least the solstice will be behind us tomorrow, but we'll have to live with a weaker pound in 2016.”

Meanwhile, commodity linked currency crosses had mixed fortunes versus the greenback. The Australian dollar rose against its US counterpart exchanging at US$0.7245 up 0.76%, as did the New Zealand dollar up 0.78%, changing hands at US$0.6816. The greenback also shed gains against the Canadian dollar changing hands at CAD$1.3941, down 0.13%.

In Latin America, the dollar traded higher against the Chilean (up 0.10%) and Mexican (up 0.06%) pesos. Going the way, Brazilian Real and Colombian peso gained 0.67% and 0.71% against the US currency respectively.