Guest post by ForexTraders.com
Last week saw the U.S. Dollar again trade softer against most of the other major currencies. Also, commodity prices mostly gained, with crude oil gaining 3.9% to close at $78.98 per barrel, with a predictably positive effect on the Australian and Canadian Dollars. Nevertheless, the price of gold closed virtually unchanged at $1,187.80 versus the $1,188.20 close seen the previous week.
As was also seen the previous week in the wake of dovish comments contained in the FOMC Meeting Minutes, last week again saw investors’ unease about the U.S. economy grow considerably, with a sustainable recovery in the United States still seen as years away.
Market Concerned About Fed Chair Bernanke’s Comments
Additional U.S. Dollar weakness seen last week came largely on the back of worrisome comments made on Wednesday by Fed Chairman Bernanke. In congressional testimony, Bernanke confessed to having “unusual uncertainty” about the U.S. economy.
These comments exacerbated existing concerns in the markets over a double dip recession in the United States that were fueled by the previous week’s dovish FOMC comments.
Dollar’s Response Mixed Versus European and Asian Majors
Despite Bernanke’s comments, the Greenback managed to rise by 0.8% against the Japanese Yen after the BOJ indicated that it remained satisfied with its present loose monetary policy stance.
Also, the Dollar was virtually unchanged against the Euro over the week. The Euro fell only -0.1% versus the Greenback after positive — although somewhat questionable — European bank stress test results were released.
Nevertheless, Cable rose 0.8% over the week as the Pound Sterling benefitted from better than expected U.K. Retail Sales numbers, as well as an unexpectedly positive improvement in U.K. GDP by 1.1% over the last quarter.
Commodity Dollars Rise on Higher Oil Costs
Furthermore, rising oil prices helped strengthen most of the Commodity Dollars, as the U.S. Dollar fell 1.8% versus the Canadian Dollar. In doing so, the Greenback erased most of its gains of the previous week, with the Loonie further assisted in its rise by an across the board interest rate hike by the Bank of Canada.
The Australian Dollar was also up an impressive 3.1% versus the Greenback on the back of renewed inflationary concerns in Australia, with key Australian CPI data coming out this week that could well spark further market movement in AUDUSD.
In addition, the New Zealand Dollar rose 2.2% last week, despite little economic news out in New Zealand. Market makers priced the currency higher most likely in anticipation of another rate hike widely anticipated in New Zealand by the RBNZ in their rate decision to be announced this coming week.
Weekly Recap and Outlook for the U.S. Financial Markets and Dollar – 7/26/2010
The Greenback was under pressure last week, especially versus the commodity dollars which all rose significantly. Strength in the commodity currencies was usually attributed to stronger oil and commodity prices, as well as higher yields and increasing interest rate differentials favoring those currencies versus the U.S. Dollar. Read full report
Weekly Recap and Outlook for EURUSD – 7/26/2010
EURUSD began the week on a positive note despite negative news on several fronts, including the E.U. and the IMF suspending talks with Hungary which was urged to cut its budget deficit before being allowed additional access to bailout funds. Also, Moody’s downgraded its debt rating for Ireland to Aa2 from Aa1. In terms of economic releases, Monday saw the Eurozone Current Account showing a deficit of -5.8B, considerably higher than the -3.0B consensus. The rate continued rising on Tuesday making its weekly high of 1.3028 as German PPI increased by 0.6% month on month, considerably better than the 0.2% expected increase. Read full report
Weekly Recap and Outlook for GBPUSD – 7/26/2010
GBPUSD began the week trading lower on Monday as the U.K. Rightmove HPI declined by -0.6% versus an increase of 0.3% for the previous reading. The rate firmed somewhat on Tuesday, despite U.K. Preliminary Mortgage Approvals declining to 48K versus a consensus of 52K expected, while Public Sector Borrowing increased to 14.5B versus the 13.2B expected, with the previous number revised upward to 17.1B from 16B. Also on Tuesday, U.K. CBI Industrial Order Expectations declined to a reading of -16, much better than the reading of -24 expected. Read full report
Weekly Recap and Outlook for AUDUSD – 7/26/2010
AUDUSD gained considerable ground last week as renewed appetite for risk returned to the markets. The pair began the week trading off of its weekly low of 0.8632 made on Monday before rallying ahead of the RBA’s Monetary Policy Meeting Minutes for June to be released the next day. The minutes confirmed that the RBA is committed to controlling inflation, stating that “headline inflation is expected to rise”, and that “the important question for the board at the next meeting would be whether the new information materially changed the medium term outlook for inflation”. This gave rise to speculation of a further RBA rate hike, possibly as soon as the next RBA Monetary Policy meeting on August 3rd and focused attention on the upcoming CPI data for Australia due out this week. Read full report
Weekly Recap and Outlook for NZDUSD – 7/26/2010
NZDUSD showed considerable strength last week as renewed risk appetite drove the rate higher. The rate started on a soft note with the pair gapping down on the Monday opening. NZDUSD then made its weekly low of 0.7027 before trading higher in the absence of any major economic releases out of New Zealand. The rate then started rallying sharply on Tuesday. Read full report
Weekly Recap and Outlook for USDJPY – 7/26/2010
USDJPY gained overall last week in the absence of any major economic releases from Japan, with the exception of the BOJ’s Monetary Policy Meeting Minutes from its June 14-15th meeting that were released on Tuesday. USDJPY began the week by trading lower initially before then reversing and rallying. The pair made its weekly high of 87.56 on Tuesday despite weaker U.S. housing numbers, and ahead of the BOJ minutes release. Read full report
Weekly Recap and Outlook for USDCAD – 7/26/2010
USDCAD declined significantly last week, giving back all of the previous week’s gains. The Loonie started picking up steam on Monday as Canadian Foreign Securities Purchases showed an increase of almost 11B coming out at 23.16B, which was almost triple the amount expected of 8.05B and almost double the previous number of 12.36B. The number indicates the considerable interest that foreigners continue to have in investing in Canadian securities. Read full report
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