EUR/USD
The 18-nation euro strengthened after failing to break through the $1.24 level, pushing the shared currency up from almost a two-year low reached as the European Central Bank considers increased monetary stimulus. The U.S. currency reached the strongest level in more than five years after a report showed the U.S. economy grew at a faster pace than forecast in the third quarter. The euro gained 0.3 percent to $1.2474 per dollar at 5 p.m. in New York, after falling as much as 0.3 percent. The shared currency reached $1.2358 on Nov. 7, the lowest level August 2012. Financial markets in the U.S. are closed on Nov. 27 for Thanksgiving holiday.
GBP/USD
The pound was slightly lower against the dollar on Tuesday after testimony by Bank of England officials to parliament’s Treasury Committee reiterated the dovish tone of its inflation report from earlier this month. Cable was down 0.24% to 1.5668, not far from last week’s 14-month trough of 1.5588. Sterling remained on the back foot after BoE Governor Mark Carney said the U.K. economy faces heightened risks from geopolitical tensions and slowing global growth, noting that economic conditions have deteriorated in the euro zone and Japan in recent months. Carney reiterated that it is “more likely than not” than U.K. inflation will fall below 1% in the next few months. However the central bank expects inflation will move back towards its 2% target in the medium term, as wage increases pick up. The BoE head also reiterated that when rates do start to increase they will do so in a gradual and limited way. Markets scaled back expectations for a rate hike by the BoE after the bank’s November 12 inflation report warned that downside risks to inflation remain and added that the rate of economic growth in 2015 is likely to be slower than this year.
USD/JPY
The yen rallied from almost a seven-year low against the dollar as Bank of Japan Governor Haruhiko Kuroda said the economy is headed to achieve policy makers’ 2% inflation target. The BOJ last month lifted the annual target for enlarging the monetary base to 80 trillion yen ($678 billion), from a range of 60 trillion yen to 70 trillion yen. The policy board voted to retain the plan at the end of a two-day meeting on November 19.
