USD remains under pressure
2 June, 2009
Yesterday we saw a fresh seven month high against the dollar and a six month high against the euro. The pound made early gains in the markets yesterday and consolidated those gains overnight. The pound is galvanizing on signs that the global economy is recovering following huge depreciation as the economic crisis unfolded. The key drivers in the market remain activity in the equity markets and the sentiment to buy higher yielding and riskier assets.
Recently the markets have been boosted by gains in Asian stocks, in particular commodity stocks, this was fuelled by improved sentiment from China. This is leading to a move out of USD predominantly and also other low yielding currencies are shedding earlier gains- such as the Yen and the Swiss Franc. Low interest rates and improved confidence are naturally causing higher yielding commodity based assets to be sought…CAD, AUD and NZD looking strong.
The mighty USD remains the key driver for the currency markets…it still remains the main harbour for currency reserves despite recent concerns on a spiraling debt burden. In fact China yesterday affirmed during a visit by US treasury secretary Tim Geithner that the USD would remain the global reserve currency and their home for the bulk of their currency reserves- a huge boost for the dollar. Therefore any trepidation in the markets will lead to US dollar strength again.
Yesterday was PMI day and all economies showed good evidence of green shoots emerging. There were some impressive numbers from the UK, Europe and the US as well as strong manufacturing data from China. This added to upward pressure on both oil and hard commodities and we saw gold again within touching distance of the psychological $1000 barrier.
In other news the Reserve Bank of Australia left rates unchanged at 3.0% citing signs of the global economy stabilizing as a reason to leave rates unchanged. UK mortgage approvals for April have come in at 43,201, up from 40,038 in March and better than the median forecast of 41,000.
Good bit of news also from Spain as the May jobless total fell 24,741 against the 39,478 rise in April, the rapidly falling jobless count in Spain has been a major concern.
Report by Phil McHugh
The contents of this report are for information purposes only. Currency Market and MarktClub Updates are compiled by Tom Nadir.