Rising equity markets continue to push investors towards riskier assets and away from safe haven currencies such as the USD and JPY. Traders today will be following the Unemployment Claims release for further signs the U.S economic recession is easing.
The Dollar recorded an extremely volatile day of trading as a variety of factors helped push up the demand for riskier assets, whilst reducing the demand for safe-haven positions. Equity markets in the U.S. rallied as many companies in the U.S. recorded far better-than-expected results. These led to major banking shares, such as Bank of America and Citigroup making remarkable gains yesterday. The market also continued to move on the better-than-expected U.S. consumer confidence figures from Tuesday. The equity market surge and Dollar decline was also owed to Tuesday’s impressive U.S. Consumer Confidence figures.
The USD tumbled by more than 130 pips against the EUR in yesterday’s trading to close at 133.22. This is much owed to the fall in demand for safe-haven currencies, as it seems that the U.S. recession may be bottoming out. This is despite poor U.S. GDP figures that were released yesterday. The Dollar also made losses against the GBP to end the day down 125 pips at 148.30. However, versus the JPY, the USD finished higher 0.6% or 60 pips as the demand for the safe-haven Yen plummeted in yesterday’s trading. This was largely owed to news that the economic situation in Japan, China and the U.S. was starting to improve.
As of today, there are a number of important U.S. economic data releases that are set to be released. The most important of which are the Unemployment Claims, Personal Spending, and Personal Income figures that are set to be released at 12:30 GMT simultaneously. The market is likely to be very volatile on the release of these figures. Additionally, later on today, the market is likely to take into account the poor U.S. GDP figures that were released yesterday. Therefore, the USD may reverse some of the losses that it made yesterday against its major currency crosses as investors may return to the safe-haven Dollar. We could see the EUR/USD trading near the 1.3200 level by the end of the day.
