The US dollar had a strong week, with a strong start. It later weakened but remained higher than other currencies. The EU summit optimism erased the gains near the end of trading.
The US dollar had a strong start to the forex trading week. Two unexpected geo-political developments helped the dollar.
The Russian renewed backing of the US dollar as the world’s reserve currency promised a strong start for the dollar. Alexei Kudrin said that there’s no alternative for the dollar.
Second, the turmoil in Iran following the controversial election results caused worries about stability in this rich oil producing nation. When fear is near, the dollar gets gear.
The EUR/USD feels political news more than others. This pair fell below 1.40 and reached the strong resistance line of 1.3750 before bouncing back.
American Indicators – No Big Surprises
Later in the week, “normal” events such Building Permits and Unemployment Claims in the US came out as expected. PPI was disappointing, rising only by 0.2%. Also TIC Long-Term Purchases recorded only 11.2 billion. On the positive side, the Philly Fed Manufacturing Index was much better than expected, and fell by only 2.2 points.
An interesting release was Core CPI, which rose by 0.1%, exactly as expected. Maybe the interest rate hike I was seeing is still beyond the horizon… ????
All in all, indicators were quite expected, and the dollar went up and down during the week. On a rather slow Friday, the dollar was slightly higher than last week’s close. It is seen across the board.
Taking the Euro, EUR/USD had stabilized around 1.3900-1.3950.
And then came the EU summit.
EU Summit of Hope
Leaders of the European Union met in Brussels and began talking about the end of the crisis. After spending about 5% of GDP in stimulus plans, they expressed optimism that the old continent is seeing first signs of a sustainable economic recovery.
This fresh optimism ignited risk appetite. The US dollar fell against other currencies. EUR/USD now trades at around 1.40, near its value at the beginning of the week.
Do you also think that the EU summit brought the dollar down? Or is it merely a Friday effect?