British Pound Soars as Inflation Remains the Same

The U.S. Dollar is feeling downside pressure across the board from all Forex markets with the exception of the Japanese Yen as better than expected news from the Euro Zone and the U.K. are signaling the possibility of an economic recovery.

The U.S. Dollar is feeling downside pressure across the board from all Forex markets with the exception of the Japanese Yen as better than expected news from the Euro Zone and the U.K. are signaling the possibility of an economic recovery.

This morning it was reported that German investor confidence increased more than expected. This news combined with last week’s news of economic growth in France and Germany is leading traders to believe that the Euro Zone is poised to mount a strong recovery.

U.K. inflation was reported better than expected triggering an early short-covering rally that has been gaining strength throughout the day. Traders had been expecting inflation to drop sharply as recent comments from the Bank of England had indicated that it expected the slow down in the economy to continue. The GBP USD has erased all of yesterday’s losses and is currently in a position to retrace several days of weaker trading.

The stronger stock market and general demand for higher yielding assets is leading to profit-taking in the Japanese Yen after several days of strength.

Higher energy and stock prices has also triggered a short-covering rally in the Canadian Dollar. The USD CAD bottomed the first week in August on weaker than expected Canadian employment news and has since gained strength because of dropping demand for higher yielding assets. Today marks the first day in a week where there are signs of profit-taking.

Higher yielding currencies such as the AUD USD and NZD USD are trading better this morning as these two markets take back some of yesterday’s losses. Fear that economic issues in China will lead to lower exports in these two countries has been encouraging profit-taking recently. Resumption in demand for higher yielding assets lead by a recovery in the equity markets could trigger a test of recent highs.

James A. Hyerczyk has been actively involved in the futures markets since 1982. He has worked in various capacities within the futures industry from technical analyst to commodity trading advisor. Using W. D. Gann Theory as his core methodology, Mr. Hyerczyk incorporates combinations of pattern, price and time to develop his daily, weekly and monthly analysis. His firm, J.A.H. Research and Trading publishes The Forex Pattern Price Time Report... More

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