Risk Taking Leads To Further Dollar Losses

The US dollar fell against most of its main currency rivals on Friday, a day after the Fed announced a new round of quantitative easing to stimulate growth in the US economy. The news led to risk taking among investors, who shifted their funds from safe-haven currencies like the greenback, to higher yielding ones like the euro and AUD. This week, traders will want to pay attention to a batch of euro-zone and US news. Tuesday’s German ZEW Economic Sentiment, Wednesday’s US Building Permits figure and finally German manufacturing data and a Spanish bond auction on Thursday, all have the potential to create significant market volatility.

Economic News

USD – Dollar may Extend Bearish Trend This Week

The US dollar took additional losses on Friday against its main currency rivals, as investors continued to shift their funds to higher-yielding currencies following the Fed’s decision to initiate a new round of monetary easing to boost the US economic recovery. The USD/CHF fell more than 100 pips over the course of the day, eventually reaching as low as 0.9237 before staging a slight upward recovery to finish out the week at 0.9269. The GBP/USD shot up more than 70 pips over the course of the day to trade as high as 1.6255 before a downward correction brought the pair to 1.6215 where it closed out the week.

Turning to this week, traders will want to pay attention to several potentially significant US indicators. On Wednesday, the Building Permits and Existing Home Sales figures may be able to help the greenback recoup some of its recent losses if they come in above their forecasted levels. On Thursday, the weekly Unemployment Claims, followed by the Philly Fed Manufacturing Index may also generate volatility in the marketplace.

EUR – German Data Set to Impact EUR This Week

The recent approval of the ECB’s plans to boost the euro-zone economic recovery combined with the Fed’s decision to initiate a new round of quantitative easing in the US, led to broad euro gains on Friday. The EUR/USD advanced well over 100 pips over the course of the day, eventually reaching as high as 1.3166, its highest level in more than four months. Against the Australian dollar, the euro also was able to gain more than 100 pips before closing out the week at 1.2438.

Euro traders will want to pay attention to several indicators out of the euro-zone this week. Germany, the EU’s largest economy, will release an economic sentiment figure on Tuesday, followed by manufacturing data on Thursday. In addition, a speech from ECB President Draghi on Thursday could impact the marketplace. Any better than expected data out of the EU could help the common currency extend last week’s upward trend.

Source : Daily Market




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