US Dollar falls back eradicating some gains made over the last few days

Further speculation about the size of the quantitative easing package required in the US saw the US Dollar fall back yesterday eradicating some of the gains of the past couple of days, despite the problems emanating from the periphery of the Eurozone in Portugal and Greece, and to a lesser extent Ireland.

In addition the US Dollar wasn't helped when a statement from the IMF stated that exchange rates were broadly in line with fundamentals in Japan, the Eurozone and in the UK, but that the US Dollar was on the "strong side" of fundamentals. The combination of QE speculation and the IMF statement helped Sterling to gain 1.5 cents on the US Dollar yesterday.

Sterling has continued to bask in the glow from this week's good GDP numbers even though the UK housing market was dealt another blow yesterday. The Nationwide house price index reported a fall of 0.7% in October while September's reading was revised down to 0.0%. It is interesting to note that according to Nationwide house prices have not increased since May 2010.

The week ends with a big day for the US. Today's release of third quarter GDP figures will prove to be a big test for the US with expectations of a 2% rise. If the figure exceeds 2% we could well see a bounce for the Dollar on expectations of a reduced stimulus package. A poor figure and the Dollar could fall quite quickly.

Today also includes UK lending figures and the October Chicago PMI and the final reading of October University of Michigan consumer sentiment.