Euro - US Dollar (EUR/USD)

According to our statistical analysis on the EURUSD return since 1986, the euro appreciated against the U.S. dollar 14 out of 21 times in period that from December 1st (Synthetic euro prices were used prior to January 1999). This is nearly 67 percent of the total sample and reveals a seasonal pattern in the behavior of the EURUSD during the last month of the year. In detail, the data indicates that the Euro gained on average, 3 percent during the positive months and lost just 1.36 percent during the negative months. Moreover, the seasonally factor was stronger in the last decade with the EURUSD appreciating on 7 years out of the last 10. Like we said last year, there are many reasons to explain this, but the most obvious may be year end repatriation out of the US dollar assets.

Yesterday during the holiday trading the EUR stroked a new record high against the
U.S. dollar and has reached the level of 1.4873 per US dollar. The 13 nation currency, the Cable and other currencies have been climbing steadily against the
dollar since August on the back of fears of the state of the U.S. economy and these
fears strengthened by the subprime credit crisis.
The US dollar has been further weakened by U.S. interest-rate cuts -- which can be
used to jump-start an economy but can also weaken a currency as investors transfer
funds to countries where they can earn higher returns. The Federal Reserve has
already cut rates twice.
Yesterday the 13 nation currency increased and got stronger against the US dollar on
the basis of different assumptions of the European Central Bank policy makers
regarding the future steps which will be taken in order to deal with the issues of
inflation; which probably will accelerate during the short term, and will create the
need for the central bank to resume raising interest rates.
Europe's single currency also rose against the yen after the yield premium investors
earn on 10-year German bunds over similar-maturity Japanese government bonds
increased to 2.60 percentage points yesterday.

In other news yesterday, UK data out showed a sharp slow down in business
investment, darkening the outlook for the overall economy. The data kept pressure on
the pound which is now close to its lowest against the EUR since May 2003.