Currency Markets Today

The U.S. dollar lost ground to the Euro Friday, after a raft of  fundamental data in Europe beat analysts expectations suggesting that a recovery was possibly on the horizon. One of these fundamental news items was the Munichbased Ifo Institute’s July German business climate index, which rose for the fourth consecutive month in July, posting a reading of 87.3. Economists had forecast a rise to 86.5 from 85.9 in June. The euro saw a modest jump versus the dollar after the data, extending gains above the 1.42 level. Data from the U.K., however, went against the prevailing trend of better than expected readings and has weighed on pound sterling, Friday’s notable under performer so far. U.K. gross domestic product for the second quarter was reported to have contracted by 0.8% from the previous quarter, a deeper decline than had been forecast. Some of the pressure on the pound is over concerns that persistent U.K. economic weakness may lead the Bank of England into expanding quantitative easing measures, which are usually negative for a currency in the short run at least.

The US dollar vs yen continues to hold in the 94.86 region having oscillated between the 94.68 and 94.93 levels since the start of the US session as some profits are booked on yen shorts and as traders keep an eye on US stocks,  in order to determine the next leg of the risk-on/risk-off saga that has played out this week.

Currency Markets – Outlook This Afternoon

The euro vs dollar is nudging higher again to trade at 1.4240 in the upper reaches of the US session range that peaked at USD1.4254 earlier, the move actually building ahead off the stocks rebound. Offers remain around USD1.4260 and very light chatter has suggested that sovereigns were earlier sellers into the euro bounce, though not necessarily into the highs. The Euro is currently easing to 1.4235. Traders note that likely model and momentum accounts got whipsawed yesterday and are likely to be sidelined today without more volatility higher as they appear to be biased to the upside. The UK Pound extended recovery to USD1.6459, the rate seen meeting resistance from offers placed around USD1.6460 (76.4% USD1.6482/1.6389). Above USD1.6460 could  open a move back toward USD1.6480/85, with support noted toward USD1.6400. Meanwhile the dollar yen continues to hold the 94.95 area in current trading after the shallowest of dips to 94.85

The US dollar is consolidating the lows again after Thursday’s solid attempt at a rally, a big disappointment for the bulls – traders were looking for the USD to hold gains into Friday with a real chance of an equities sell off adding to the hopes for a bottom. Although the dollar is forming a wide trading range many analysts think the sentiment is overly bearish and the shorts will cover soon. If equities can’t follow through today, many analysts expect to see a USD rally as risk is taken off the table. Look for a better close today for the US dollar.

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Currency Markets – European Trading & Into New York

The U.S. dollar was slightly lower against the Japanese yen on Wednesday but held its ground against other major currencies, as investors eyed a softer tone in equity markets. The dollar and yen have both remained sensitive to moves in equity markets, rallying on safe-haven flows when demand for shares and other assets was perceived to be more risky. Conversely, the currencies have tended to lose ground when investors have shown an increased appetite for risk. The euro traded lower to 1.4120, down from USD1.4197 late Tuesday, and the British pound traded at 1.6437, little changed from earlier. The euro had little reaction to the fundamental news in Europe this morning which showed industrial new orders across the euro zone falling by an unexpected 0.2% in May. Economists had forecast a 2% monthly rise, so the green shoots will have to wait!

The British pound trimmed losses after minutes of the Bank of England’s July 8-9 Monetary Policy Committee meeting showed members voted 9-0 to leave the bank’s asset purchase program unchanged at 125 billion pounds (USD205 billion). The Canadian dollar has one less roadblock in the way of further appreciation, after the Bank of Canada lowered the intensity of its jawboning against undue currency strength in Tuesday’s policy statement. Heading into Tuesday’s central bank policy announcement – which produced the expected reiteration of a conditional commitment to hold the key policy rate at 0.2% well into 2010 along with rosier economic projections – there had been concerns that the Bank might again speak out forcefully against rapid Canadian dollar appreciation.

Currency Market Outlook

For the euro vs dollar we are getting reports that offers are now seen placed between /30 from Far East account(s).Traders suggest that interest could be option related noting the large expiry for the NY cut. Early trading in New York has seen demand for the euro crosses, in particular the euro yen which is now trading at 133.11.

The dollar vs yen continue to drift lower in early trading as the markets continue to absorb Ben Bernanke’s comments, with many of the major currencies simply trading sideways but with added volatility minute by minute. Very difficult trading conditions at the moment and not for the feint hearted or novice.

You can keep up to date with all the latest fundamental news on the economic calendar, latest currency news and live currency charts by simply following the links.  I have also included details on an excellent ECN broker.

Currency Update – Yesterday & Overnight Trading

The Japanese yen rose slightly against the dollar and euro in Asia Wednesday as short term players bought the safe haven Japanese unit on renewed concern that U.S. lender CIT Group Inc. may go bankrupt, further damaging the U.S. economy. Short term investors responded by pushing the U.S. dollar down to 93.60 in the Asian session from 93.66 in New York late Tuesday, with the euro sliding  to132.93 from 133.01. On Tuesday, the euro vs dollar reached its highest level in seven weeks at 1.4278 and then retreated to end lower against the dollar, after risk sensitive currencies in general reversed direction and ceded ground to the greenback. Technical factors, including the market’s reluctance to push major currencies out of recent ranges, also played a role in the euro’s reversal Tuesday.

The British pound also fell against the dollar after the UK’s budget deficit climbed to its highest level since records began in 1993. The budget shortfall climbed to 21.4 billion in June, which beat forecasts of a climb to 25.5 billion, but fueled concerns that the government will struggle to find buyers for its assets.The Canadian dollar rose to its highest level in more than five weeks against the dollar after the Bank of Canada left its key interest rate at a record low 0.25%, whilst it’s Aussie counterpart was stronger late Wednesday as risk appetite continued to surge and domestic inflation data helped water down expectations of more interest rate cuts.

Currency Markets – Outlook Today

The euro is continuing its retreat today, along with the UK pound, as worry about risk reappears as market participants continue to watch how the crisis surrounding CIT develops. They will also scrutinize earnings reports due later in the trading day from  some of the larger banks such as Morgan Stanley, Wells Fargo, the Bank of New York Mellon Corp. and U.S. Bancorp, which will provide some measure of the state of the U.S. financial sector. As a result we could see the US dollar fall to 92.80 against the yen,  and the euro to 132.00 if those reports disappoint investors or concern over a potential CIT bankruptcy grows.

European stocks are expected to open marginally higher Wednesday, as the gains generated by positive earnings data are set to continue but at a lesser pace as investors pause for breath, and reconsider their appetite for risk.

You can keep up to date with all the latest fundamental news on the economic calendar, latest currency news and live currency charts by simply following the links.  I have also included details on an excellent ECN broker.