Strong Industrial Data Drives Euro Higher

The U.S. Dollar istrading lower across the board as trader demand for risky assets soaredfollowing the news out of Europe.

The U.S. Dollar is trading lower across theboard as trader demand for risky assets soared following the news out of Europe. The release of the bullish industrial reportcombined with Bernanke’s dovish tone sends a signal to investors that theEuropean Central Bank is moving closer to a possible rate hike while the Fed isstill struggling with the possibility of a double-dip recession. Furthermore,the bullish Euro Zone numbers is a sign that the ECB is likely to refrain fromapplying additional stimulus measures while the weakening U.S. economic data means the Fed islikely to consider a second round of quantitative easing.

The strong rise in the Euro is spreading toother currency markets as traders position themselves for a weaker U.S. economy.Traders are demanding higher yielding assets as they anticipate the Fed leavinginterest rates lower for a much longer period of time than previouslyestimated. U.S. Treasury Bond traders are pricing in the possibility of a Fedrate hike for September 2011. The bullish news about the Euro Zone and thedovish outlook for the U.S.economy is especially bullish for commodity-linked currencies.