The dollar has been going up as traders wish to avois risk. This means back to the basics and that means the dollar. Global markets are still looking to China for direction and seem to be still walking around in circles. No one's pointing out the way.
This makes the dollar very attractive. Look for continued upward movement in the weeks to come.
I've had this notion for some time. Oil rallied yesterday (August 19) after oil inventory reports showed lower oil on hand. This news at first hit the dollar then helped oil prices it seems. Buying in equity markets was also triggered as traders are willing to take on more risk. Watch action today and tomorrow on the dollar, as this will show if the dollar will continue the down trend or start going back up.
The U.S. stock market still appears bearish.
Traders are avoiding risk and the place to that is in the dollar. Stock futures were sharply lower adding to the risk aversion notion. Equity markets have been hit with much bearish news which has made the dollar a safe haven for investors again. Consumer spending remains sluggish allowing many to question if U.S. economic recovery is still around the corner.
The dollar rose to a monthly high versus the sterling.
The dollar gained on Friday the 14th with help from the triple digit drop in the DJIA. Also helping a bit was news that the eurozone is still in recession. Traders consensus is for more gains in the dollar, but they should be modest. Recovery is still the keyword. U.S. consumers still aren't spending.
The Bank of England decided to expand the amount of pounds to pump into the economy to the tune of 50 billion. With the news the gbp/usd fell 150 pips. The exit plan from British monetary leaders will be interesting to say the least.
Australia showed job growth and that was good for their currency.
On Tuesday, the 5th, the dollar was still scratching against the other major currencies. Risk appetite seems to be diminishing, but traders pulled away from going to the dollar. The dollar hit a ow against the pound it had not seen since last fall.
Oil invetories are higher, however crude is testing $72. U.S. commercial crude inventories went up by 1.7 million barrels in the previous week.
Stronger unemployment numbers over the past several months will create U.S. government deficits that could be more than originally projected. Long-tern interest rates could rise as a result of the burdens of financing the deficits, even when the economy improves. Higher deficits also may make it a tough case to sell the healthcare reform and cap and trade issues.
That brings us to the next item: the dollar. what's hurting the dollar is both fundamentals and technical. With the help of the usual numbers coming in negatively and take a look at the usd index, it is no wonder why the dollar decline continues. Also knocking on the door is eroding purchasing power, inflation and stagnation well into the future. Usually a lower dollar means higher commodities and precious metals.
The dollar got hit yesterday (the 3rd of August) as investor confidence goes to the equities markets. The dollar bearishness seems to be overdone. Strength in the euro remains. The European Central Bank will most likely have interest remain unchanged.
The U.S. government lowered the estimated decline in Q2 GDP and that news hit the dollar hard. The pound still had support on its own, and with the GDP news, the big gainer was GBP/USD, which exhibited a breakout rally. A stronger risk appetite helped the EUR/USD too.
Signs of a recovery in the U.S. economy are here as most traders sighted higher crude prices and a higher Canadian Dollar as signals good for the U.S. economy.
