US dollar fell on Thursday as the US stock markets rallied in reaction to better than expected US economic data. This reduced the appeal of the US dollar as a safe haven and investors shifted their focus towards the equities. US pending home sales improved in December as compared to November while manufacturing activity in Chicago also boosted surprising everyone. However on negative side the US jobless claims increased to 381,000 in current week.

Economists at RDQ Economics commented, “The evidence continues to grow that economic growth is on an upswing as 2011 draws to a close.”

In reaction to weaker greenback the single currency also found support and recovered from its lowest in 11 years. The euro gained to 1.2949 versus the US dollar on Thursday as compared to 1.2938 in Wednesday’s North American trading session. The euro fell versus the Japanese Yen to 100.54 on Thursday as compared to 100.83 on Wednesday. The single currency has fell 3.3 percent versus the greenback in the current year while is down 7.4 percent against the Japanese Yen.

The dollar index DXY which measures the greenback’s performance against its six major counterparts fell to 80.425 on Thursday as compared to 80.526 on Wednesday’s North American trading session. The dollar index has appreciated 1.8 percent in the current year.

Among other currencies, the British Pound declined to 1.5412 versus the US dollar as compared to 1.5455 on late Wednesday. The Pound Sterling has declined by 1.3 percent in the current year.

Against the Japanese yen, the greenback fell to 77.63 on Thursday as compared to 77.95 on Wednesday.

The US dollar fell on Tuesday against the euro as the investors were optimistic about the euro zone debt solution ahead of the European Leaders summit by the end of this week. Leaders from 27 European Union member countries will meet in Brussels on Friday to discuss the different fiscal rules which could be helpful in European financial stability.

Research director, Kathleen Brooks from forex.com commented, “Markets may be reacting mildly to the risk of downgrades because so many of the major economies are under the same threat, and the safest ones may still benefit from any flight to safety,” she further added, “Although markets reacted to the S&P news by selling risk, on second thoughts the markets may have decided that AA-plus is the new AAA.”

The single currency remained under pressure in earlier trading session due to warning of reduced credit rating by Standard & Poor’s rating agency.

The euro gained to 1.3416 against the US dollar on Tuesday as compared to 1.3386 on Monday’s late trading hours.

The dollar index DXY which tracks the greenback’s movement against its six major counterparts fell to 78.498 on Tuesday as compared to 78.654 on Monday’s North American trading session.

The US dollar also fell to 77.75 against the Japanese yen on Tuesday as compared to 77.80 on late Monday. However, the Pound Sterling declined versus the greenback to 1.5609 on Tuesday as compared to 1.5637 on Monday’s late trading hours despite the news of Bank of England extending its lending facility for tackle the liquidity crunch.

Major economic events that have significant affect on the trading of the British Pound and US dollar for the week ending December 9^th are as follows:

On Monday December 5^th, 2011, United States reported its official data on factory orders while Institute of Supply Management released its report on service sector activity.

On Tuesday, December 6^th, 2011, official data on retail sales will be published in United Kingdom.

On Wednesday, December 7^th, 2011, United Kingdom will report its official data on manufacturing and industrial production while the National Institute of Economic and Social Research will report its quarterly GDP estimate for UK. In United States, official data on crude oil inventories will be reported.

On Thursday, December 8^th, 2011, United States will publish its weekly report on initial jobless claims while in United Kingdom, Bank of England is expected to announce its benchmark interest rate.

On Friday, December 9^th, 2011, United Kingdom will report its official data on producer price inflation along with figure on the country’s trade balance. In United States, several reports will be published which include, data on trade balance and University of Michigan’s data on country’s inflation expectations and consumer sentiment.

The single currency recovered on Tuesday as the IMF stepped in and disclosed more tools which could help in improving liquidity and financing needs of its European member countries. The International Monetary Fund pointed out, that new tools will help in meeting the diverse liquidity needs of its member countries. The IMF said, “The new tools will enable the fund to respond better to the diverse liquidity needs of members with sound policies and fundamentals, including those affected during periods of heightened economic or market stress—the crisis-bystanders—and to address urgent financing needs arising in a broader range of circumstances than natural disasters and post-conflict situations previously covered.”

The single currency gained to 1.3513 on Tuesday as compared to 1.35 on Monday’s North American trading session.

The dollar index DXY which measures the US dollar’s performance against its six major counterpart currencies fell to 78.252 on Tuesday as compared to 78.252 on Monday’s late trading hours.

Against the Japanese Yen the US dollar slightly gained to 77 on Tuesday as compared to 76.79 on late Monday. The British Pound gained to 1.5637 versus the greenback as compared to 1.5630 on Monday.

Many analysts were also of the opinion that Thanksgiving holiday of Thursday in United States also played a major role in recovery of the single currency and the euro gained for only short term. Currency Strategist Kathy Lien commented, “The resilience of the euro probably has more to do with short covering and position squaring ahead of an important holiday in the U.S.”

The single currency strengthened on Thursday as the European Leaders reached at a plant to tackle with Greece’s sovereign debt crisis. The new plan devised by European Union comprises of write down of 50 percent of Greek debt held by private bondholders. This is expected to leverage the EFSF up to $1.4 trillion.

Director of currency research, Kathy Lien from GFT commented, “Investors around the world are cheering the fact that the Europeans have sucked it up and done what was necessary to mitigate a deeper crisis in the region, “Their sheer relief that the process hasn’t been drawn out even further (aside from the fact that some technicalities need to be ironed out at the November euro-zone finance ministers meeting) has provided a nice boost to risk appetite.”

The euro jumped to 1.4208 against the US dollar on Thursday as compared to 1.3911 on Wednesday’s late trading hours. The dollar index DXY which tracks the greenback’s movement against its major counterpart currencies declined to 75.883 on Thursday as compared to 76.207 on Wednesday’s North American trading session.

Among other currencies, the Australian dollar gained to 1.0727 versus the US dollar as compared to 1.0393 on late Wednesday. The US dollar also fell against the Japanese yen to 75.92 on Thursday as compared to 76.19 on Wednesday’s late trading hour. The British Pound advanced to 1.6117 against the greenback on Thursday as compared to 1.5967 on late Wednesday.

The single currency gained on Thursday after the joint statement of Germany and France for the final decision to be made at European Summit on this weekend. Investors were optimistic that a positive outcome will be delivered regarding the region’s debt crisis.

The euro gained to 1.3773 versus the US dollar on Thursday as compared to 1.3745 on Friday’s North American trading session. The dollar index DXY which measures the US dollar’s performance against its six major counterpart currencies declined to 76.982 on Thursday as compared to 77.152 on Wednesday’s late trading hours.

However the single currency remained under selling pressure in the first half in reaction to the news that German’s governments is trying to delay the European Summit meeting on Sunday.

Director of currency research, Kathy Lien from GFT commented, “German officials continue to throw cold water on the market’s hope for a comprehensive rescue plan this weekend, headlines are dominating short term risk appetite and will continue to do so over the next 48 hours. Even though investors are still choosing to focus on the positive, German and French officials are not so subtly hinting that a deal will be difficult to strike.”

The US dollar also weakened against the other currencies as the British Pound surged to 1.5791 on Thursday as compared to 1.5758 on late Wednesday. However against the Japanese Yen the greenback gained to 76.85 on Thursday as compared to 76.79 on Wednesday’s late hours.