The US dollar gave back some post-GDP gains made on Tuesday when data showed that the US economy grew faster-than-expected in the third quarter. The dollar rallied strongly against the yen following the news that the US revised up its final GDP growth estimate to a 5.0 % annual pace, the strongest since 2003.
The greenback rose to a 2-year high of 120.81 in late US session trading on Tuesday and eased slightly on profit-taking today to trade a tight range around 120.45 during the European session. The bullish dollar trend is expected to continue as the Fed is more likely to begin hiking interest rates sooner next year if US economic data keeps improving.
The euro bounced slightly higher today to move off yesterday’s 2-year low of 1.2164, climbing to a high of 1.2206. Euro watchers may want to keep an eye on the political turmoil in Greece. There is a risk of early elections if Greek Prime Minister Antonis Samaras fails to get support from enough lawmakers on December 29 for his choice of President, Stavros Dimas.
Sterling rebounded from a 15-month low of 1.5484 hit yesterday after disappointing UK GDP and current account deficit figures. The final estimate of annual GDP was revised down to 2.6% from a previous reading of 3.0%. A broadly weaker dollar today helped cable edge up to test the key 1.5550 level.
The pre-Christmas trading session will close up with US data on initial jobless claims later in the US session today.