The USD surprisingly underwent a bullish trading session yesterday as it appreciated against all of its major currency rivals. Earlier in the day, the greenback reached session highs against the EUR after negative Euro-Zone manufacturing data focused attention on weakness in the Euro-Zone. At the end of yesterday’s session the USD closed at 1.4644 versus the EUR. The USD also saw steady gains against the Pound Sterling and Swiss Franc.
The most influential economic data coming from the U.S. yesterday were the testimonies of Fed Chairman Bernanke and Treasury Secretary Paulson to the Senate Committee on Banking, Housing, and Urban Affairs. Investors were encouraged by a slight decrease in oil prices as they awaited details of the U.S. government’s bailout package. The initial euphoria about the plan to buy damaged mortgage debt has turned to anxiety about how the government will fund the $700 billion deal without burdening the U.S. taxpayer. Analysts say that this has limited the USD’s gains. Liquidity was thin in the market, with investors uncertain about the future movement of the stock market. They were staying on the sidelines until turmoil in financial markets subsided. In other news, the Bernanke and Paulson testimonies were in support of their proposal to give the government the authority to buy up illiquid assets, something Congress seems skeptical about unless there are mechanisms built into the law that would protect U.S. taxpayers from any downside losses. The proposal has had a huge affect on the greenback so far this week.
Looking ahead to today, the most important financial indicator scheduled to come from the U.S. economy is the Existing Home Sales. Analysts forecast that the Existing Home Sales will slightly drop to 4.93M from 5.00M. If data returns inline with expectations we should see the dollar’s resurrection continue as traders will look to infuse bullish USD positions. Traders should also keep tabs on today’s testimonies by the Bernanke and Paulson as they are scheduled to testify to financial committees in Congress again today regarding their economic rescue package.
