The EUR appears to be in a correction as the currency's gains on the Dollar are unraveling. The currency has slid the past 2 days amid concerns of future monetary policy moves by the European Central Bank (ECB) and a drop in risk tolerance. Yesterday the EUR finished lower against the Dollar while the EUR/GBP fell to 0.9250 from 0.9312.
Market forecasts have the ECB slashing rates by another 50 basis points later this week. However a debate still rages whether the ECB will take further measures to ease the strained European credit markets through a program of buying long term government bonds. This would follow a move taken by the U.S. Federal Reserve and Bank of Japan. Yesterday ECB President Trichet addressed the European Parliament and said that the European economy has weakened since the beginning of the year. Also notable was the downgrade of the sovereign debt rating of Ireland.
Today the EUR may be impacted by the release of the yearly CPI Flash Estimate. It is an early indicator of inflation in the EU. Trichet yesterday mentioned that there is no significant risk of deflation and the ECB has set a target rate of inflation near 2%. The Flash Estimate is forecasted to rise by 0.7%. A higher number that contradicts Trichet's statement yesterday may hurt the EUR further during today's trading.
Sunday, March 21, 2010
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The Dollar continued its appreciation yesterday as fears of bankruptcy filings in the U.S. auto industry sparked safe haven currency bets. Losses in U.S. equity markets triggered by autos and bank worries also helped to bring traders to the Dollar. The EUR/USD finished the day at 1.3190 from 1.3268, while the GBP/USD ended at 1.4256 from 1.4276.
Yesterday there was little reason for Forex Traders to take positions in riskier currencies. Over the weekend Treasury Secretary Geithner said some banks may need further capital injections. Also shaping the markets was the Obama administration's position that it may prefer a bankruptcy filing of an auto maker versus further bailouts. Now a looming threat of a General Motors or Chrysler bankruptcy filing hangs over the head of the market. A situation like this could have a detrimental effect on the financial markets as the debt of these two companies is widely held throughout the global financial system.
Looking to today's trading, traders should be aware of the release of Canadian monthly GDP at 12:30 GMT. The USD/CAD appreciated by 1.2% today as the market anticipates a contraction of Canadian GDP by 0.6% in January. If the result comes in worse than the forecasted value, look for the USD/CAD to rise close to the 1.2700 resistance level.
Yesterday there was little reason for Forex Traders to take positions in riskier currencies. Over the weekend Treasury Secretary Geithner said some banks may need further capital injections. Also shaping the markets was the Obama administration's position that it may prefer a bankruptcy filing of an auto maker versus further bailouts. Now a looming threat of a General Motors or Chrysler bankruptcy filing hangs over the head of the market. A situation like this could have a detrimental effect on the financial markets as the debt of these two companies is widely held throughout the global financial system.
Looking to today's trading, traders should be aware of the release of Canadian monthly GDP at 12:30 GMT. The USD/CAD appreciated by 1.2% today as the market anticipates a contraction of Canadian GDP by 0.6% in January. If the result comes in worse than the forecasted value, look for the USD/CAD to rise close to the 1.2700 resistance level.
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