The EUR USD posted a sizable gain. Tuesday’s supportive comments from European Central Bank President Trichet were not enough to stop the Dollar’s slide today.
The EUR USD posted a sizable gain. Tuesday’s supportive comments from European Central Bank President Trichet were not enough to stop the Dollar’s slide today. Matters weren’t helped after Luxembourg premier Jean-Claude Juncker said that the Euro’s rally hasn’t hurt the Euro Zone recovery. This comment gave traders the green light to drive the currency higher. If upside momentum continues at the current pace, we could see a test of 1.5063 tomorrow.
The GBP USD traded lower on Wednesday. This was triggered by a negative reaction to the Bank of England minutes and overbought technical conditions. Traders reacted to the news from the BoE minutes that the vote was split regarding the recent expansion of the central bank’s quantitative easing program. The initial reaction to the split vote was positive as it suggested the bank would not expand further. The market, however, broke after a follow-through rally failed. Traders looked for the safety throughout the New York session while they sorted out the data from the minutes report.
The U.S. reported an unexpected drop in Housing Starts. This bad news kept downside pressure on the equity markets throughout the trading session. The choppy trade in the U.S. Equity markets created see-saw movement in the currencies throughout the day. Traders didn’t know whether to buy the dips in the Dollar in anticipation of a drop in equity markets or to sell more Dollars.
The AUD USD and NZD USD attracted selling pressure throughout the session because of the weaker equity markets. These two currency pairs are vulnerable to hard breaks should the stock markets begin to sell-off. The Aussie is still seeing weakness after the Reserve Bank of Australia minutes suggested that a rate hike over the short-term is not likely.
Higher gold and crude oil supported the Canadian Dollar early in the trading session, but the move fizzled when gold began to weaken. This morning, it was reported that Canada’s consumer price index rose last month but this report was inline with expectations. The Bank of Canada is not too concerned about inflation, but rather the value of the currency. Throughout today’s early session rally traders seemed tentative about pushing this currency higher. The fear is the BoC will implement a strategy that will push down the value of the Canadian Dollar.