After a relatively encouraging first month of the New Year, the dollar index has fallen by 3% since mid-January, in part due to the Fed's surprising endorsement of more quantitative easing. Last Friday's GDP numbers were remarkably weak, confirming the prognosis of a number of Fed officials who feel that the economy could do with some further assistance. In addition, the dollar has been sold as a counterpart to the sharp short-covering rally in the euro; recall that two weeks ago, euro shorts registered a record high. The EUR had another look above 1.32 yesterday but ran into heavy selling traffic once more. Of interest is that the likes of the pound and the Aussie have essentially been steady against the single currency since mid-January, confirming that this is mostly about the dollar. It could well be temporary weakness, especially if the economy shows some resilience again. Friday's January payrolls figures could re-shape this debate
Also in today's Daily Forex Brief:
- Chinese economy holds up in January
- Greece buffeted by new troika demands
- Portugal peers over the precipice
- The difficulties of lending to the IMF
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