Euro Falls as Eurozone Economy Weakens

The dollar was modestly higher against other major currencies in a light post-Thanksgiving holiday trading Friday. The US stock market closed its session higher for a fifth consecutive day. Improving risk appetite in the equity market and weak Japanese economic data pressured the yen. Sterling fell as UK CBI retail sales weakened further. The Australian and Canadian dollars declined modestly. Today's big loser was the euro, falling versus most major currencies. The National Bank of New Zealand and the Reserve Bank of Australia will slash interest rates next week. Traders bet on a 92% chance for a 125 basis-point NBNZ rate cut. The RBA will cut its cash rate target at least 100 basis points.

The EUR/USD fell as investors increased bets the European Central Bank will cut interest rates at least 50 basis points after eurozone inflation and unemployment rose more than expected. Earlier in the week, the pair failed to penetrate the 1.31 resistance. The EUR/USD has been trading sideways since late-October, confined by the 1.31-area resistance and the 1.24-area support. A breakout of this trading channel will be followed by a larger move in the same direction.