I Forex Daily Report of 12th January 2015

DAILY CURRENCY UPDATE

Dollar index hovers near 12-year highs ahead of nonfarm payrolls

The dollar remained near 12-year highs against the other major currencies on Friday, as growing optimism over the strength of the U.S. economic recovery continued to support the greenback. 

The U.S. dollar index, which measures the greenback against a basket of six major currencies, was down 0.17% at 92.39, not far from Thursday's 12-year high of 92.76. EUR/USD edged up 0.11% to 1.1805, but still remained within close distance of Thursday's nine-year low of 1.1753.

The single currency remained under pressure after data on Wednesday showed that the annual rate of euro zone inflation fell by 0.2% in December, down from 0.3% in November. It was the first fall in the annual rate of inflation since October 2009.

The decline in consumer prices added to expectations that the European Central Bank could implement quantitative easing as soon as its next meeting on January 22. Earlier Friday, data showed that French industrial production fell 0.3% in November, compared to expectations for a 0.3% rise. October's figure was revised to a 0.7% decline from a previously estimated 0.8% drop.

GBP/USD rises off 18-month lows after upbeat U.K. data

The pound rose against the U.S. dollar on Friday, pulling away from 18-month lows as the release of positive U.K. manufacturing and trade balance data lent support to sterling, although demand for the greenback continued to receive broad invstor support.

GBP/USD hit 1.5150 during European morning trade, the pair's highest since
Wednesday; the pair subsequently consolidated at 1.5134, gaining 0.30%.
Cable was likely to find support at 1.5032, Thursday's low and an 18-month low and resistance at 1.5274, the high of January 6.

In a report, the U.K. Office for National Statistics said that manufacturing production rose 0.7% in November, beating expectations for a 0.3% gain, after a 0.7% fall the previous month.

On the other hand, U.K. industrial production ticked down 0.1% in November, data showed on Friday, confounding expectations for an increase of 0.2%. October's figure was revised to a 0.3% slip from a previously estimated 0.1% fall.

A separate report showed that the U.K. trade deficit narrowed to £8.85 billion in November from £9.84 billon in October, whose figure was revised from a previously estimated deficit of £9.62 billion. Analysts had expected the trade deficit to narrow to £9.40 billion in November. The data offset a recent string of weak U.K. economic reports and came a day after the Bank of England's monetary policy committee voted to hold the benchmark interest rate at 0.50% and left the size of its asset purchase program unchanged at £375 billion.