Greater demand for higher yielding assets is punishing the U.S. Dollar this morning. All major currencies are expected to open higher versus the Dollar.
Greater demand for higher yielding assets is punishing the U.S. Dollar this morning. All major currencies are expected to open higher versus the Dollar. Renewed interest in higher risk assets is leading to speculative Dollar selling fueled by a G20 pledge to continue stimulus spending. Equity indices are surging boosted by low inflation and earnings momentum. Gold has also cracked the $1000 barrier which is helping to make owning the Dollar less desirable.
The EUR USD broke through the August high at 1.4449 and surged to a new high for the year. Continued improvements in the Euro Zone economy are helping to attract strong buying interest as traders increase bets that the European economies will recover before the U.S. economy.
Strong speculative buying in the GBP USD has triggered a 50% retracement of the recent break. Traders are beginning to speculate that recent moves by the Bank of England are filtering through the U.K. economy while putting the economy on a path to recovery. The BoE meets on September 10th. Traders will be watching to see if the BoE makes any adjustments to its quantitative easing policy.
The USD JPY is down sharply overnight. The current move has this market in a position to test the recent bottom at 91.73. Renewed interest in Japanese bonds because of the attractive yield is triggering the current buying spree in the Yen as traders are favoring Japanese debt instruments over U.S. debt instruments.
The strong surge in the U.S. equity markets and a firmer crude oil market is helping to boost the demand for the Canadian Dollar. The trend is up in this market and momentum could drive the USD CAD to the August bottom at 1.0631.
Reports that the Swiss economy is recovering faster than the U.S. economy is helping to boost the Swiss Franc overnight. After trading inside of a tight range since June, the USD CHF is finally breaking out to the downside. The first level of support at 1.0590 has been breached, setting up this currency pair for a possible break to 1.0371.
Stronger equity prices are boosting demand for the higher yielding AUD USD and NZD USD. Talk that the Reserve Bank of Australia will raise interest rates sooner than expected is also helping to boost buying interest in this currency.
There is not much economic news driving this market this morning. Now that the summer vacation period is over, volume is expected to pick up as well as volatility.