A return of appetite for riskier currencies lifted the euro against the US dollar and Swiss franc on Tuesday, as milder headlines from the Middle East reduced safe-haven currencies' appeal. On Wednesday, the dollar and the franc remained under pressure as markets digested well an interest rate hike by China. This boded well for the Australian dollar as it regained composure after Tuesday's decline to hold well above parity against the dollar.
The euro pushed higher against the dollar on Tuesday edging further away from a 2-week low hit on Monday. The single currency was down yesterday, as weak German industrial data cooled expectations for a near-term interest rate hike buy the ECB. However, the euro found support from Asian central banks buying.
The US dollar initially held its ground on Monday, as euro seen vulnerable to rising US Treasury yields. The dollar traded in a tight range against the yen, but did surrender some of Friday's gains against the euro late in Asian trading.
The Euro dips just after Trichetâ€™s news conference yesterday, falling to new intraday lows of 1.3609 against the USD. Trading this morning has been very much range bound â€" trading in the range of 1.3619-1.3641. Ahead today we have Non Farm Payrolls data coming out and the unclear trend up till now in the
currency pair might be the result of Forex investors waiting for more direction.
The ECB kept interest rates on hold as was widely expected, but the real interest was for the talk about inflation, it seems that market speculation had been a bit overdone and although Trichet re-acknowledged short term inflation pressures, comments that short term inflation should remain in check over a â€œpolicy relevant horizonâ€ and that medium to long term inflation expectations remain â€œfirmly anchoredâ€ â€" caused investors to reassess the high expectations of ECB rate hikes coming soon.
This heightened focus on inflation is because the ECBâ€™s prime goal, or mandate is to maintain price stability targeting levels not more than 2 percent. The European central bank may cure rising inflation by tightening or in simple terms by raising policy rates to mop up circulating liquidity. Raising rates is usually positive for the currency because investment flows tend to go where yields are better.
At the time of writing
is trading around 1.3814, trading for today has been in the range of 1.3784-1.3817. RTFX
Scenario for the day sees a potential recovery towards the 1.3859/74 area. To the upside resistance lays at 1.3859/1.3907 and to downside support lies at 1.3764/1.3719.
The US Dollar regained some ground yesterday on better than expected data for the ADP National employment and as the Turmoil in Egypt gave no sign of abating.
From the Euro Zone yesterday Standard & Poors downgraded Ireland to A-, today we have the ECB interest rate decision and soon after there will be the usual news conference. Later in the evening Fed Reserve Chairman Ben Bernanke will be speaking on "The Economic Outlook and Macroeconomic Policies". Both events will gain a lot of market attention and they could turn out to be market moving events.
Despite fears over the scale 5 cyclone that was expected to hit parts of Australia yesterday the Aussie remains quite neutral against the US Dollar trading levels close to yesterday's open. The cyclone was at the end milder than expected although it was still damaging.
As the situation in Egypt seems to be showing some signs of easing and with yesterday's manufacturing data boding well for the global economic growth investors opted for the riskier positions. US equity indices closed well in positive territory yesterday and even the major Asian equity indices were up as well this morning.
Yesterday we had better than expected manufacturing numbers from France, Germany, United Kingdom and the United States. Even the figure for Euro Zone Unemployment inched lower for the first time since 2007 from 10.1 percent to 10.0 percent - these numbers were a source of optimism for the world economic outlook.
Our trend gauge for the
currency pair is currently bullish with value (6) picking up pace from yesterday's (5). What to expect for today - with the pair breaking out of the channel that had kept trading range bound since 21st January, the
could possibly be eyeing 1.39 levels next.
's (EUR/USD) scenario for the day sees a correction lower if uptrend is capped at below 1.3940 - but in case of a break of the 1.3940 the anticipated correction would be aborted.
Extreme weather conditions challenge Australians once again as authorities anticipate the arrival of a storm of catastrophic proportions in the coming hours. Thousands of Australians are leaving their homes for the safety of the shelters.