USD tumbles-Dollar index at lowest level this year 

1 June, 2009

The USD has tumbled to lower levels against a basket of currencies…the pound has jumped to 1.64 and the euro has advanced to 1.42 against the ailing US dollar. The US dollar fell as signs of a recovery in China boosted global confidence- this is significant as China is the worlds third largest economy and optimism and recovery here will go a long way to boost the global recovery.

The Dollar index which is a measure of the strength of the dollar against a basket of currencies dropped to the lowest level this year and there is a galvanizing push to sell the currency. Economically the Q1 GDP confirmed the worst six month period for the US economy in 51 years, debt levels also remain a major concern- the Congressional budget office projected the US budget deficit would quadruple to about $1.8 billion.

On top of this there is still a question mark looming on the US sovereign debt rating- heightening calls for a move out of US dollars as a reserve currency. Technically the USD could target 1.68 against sterling. Ultimately the weakness in the US dollar will ultimately lend to improved economic conditions with increased exports compensating for a public not spending.

The dollar was not helped by the news that GM is officially slipping into bankruptcy- although this has been widely expected it added to the dollars woes. The US government will step in to tale ownership of the car giant further spiraling the government spending.

This week a main focus will be on the rate announcements from the Bank Of England and the ECB. No further easing is expected from the BoE but there may be further talk or action in the QE programme.

In the eurozone CPI a measure of inflation came in at 0.0% for May- this is the lowest on record. This falling inflation indicator naturally raises the concern for deflation in the euro zone, however ECB president Trichet brushed these fears aside stating that ‘Long-term inflation expectations in the euro area, whether based on surveys or extracted from financial indicators, have been and continue to be firmly anchored at levels consistent with our definition of price stability.’

This week we will wait to see if the ECB look to cut interest further from 1% and also to see if the ECB expands its programme to buy covered bonds to revive private sector lending. Speaking in Marrakech, Trichet said ‘We expect to engage in a programme of around 60 billion euros that targets an important segment of the private securities market which has been particularly affected by financial market turbulence’. This in theory should weaken the euro and help sterling gain above the recent high of 1.1535.

On Friday we see non-farm payrolls from the US…an awful -525k is expected and anything -500k or better will be considered positive.

Report by Phil McHugh, Corporate Foreign Exchange

 Receive daily currency rate updates and market commentaries direct to your e-mail daily FREE from Currencies Direct

Currencies Direct & Forex trading
Currencies Direct & Forex Trading

Currencies Direct is a leading commercial foreign exchange company with offices in the UK, Australia and Spain and has offices across 5 continents. Currencies Direct’s head office and global trading centre is based in the City of London.

The contents of this report are for information purposes only. Currencies Direct and MarketClub Updates are compiled by Tom Nadir.

You can view new trading videos by clicking here, with my compliments.
USD tumbles – Dollar index at lowest level this year

1 June, 2009

The USD has tumbled to lower levels against a basket of currencies…the pound has jumped to 1.64 and the euro has advanced to 1.42 against the ailing US dollar. The US dollar fell as signs of a recovery in China boosted global confidence- this is significant as China is the worlds third largest economy and optimism and recovery here will go a long way to boost the global recovery.

The Dollar index which is a measure of the strength of the dollar against a basket of currencies dropped to the lowest level this year and there is a galvanizing push to sell the currency. Economically the Q1 GDP confirmed the worst six month period for the US economy in 51 years, debt levels also remain a major concern- the Congressional budget office projected the US budget deficit would quadruple to about $1.8 billion.

On top of this there is still a question mark looming on the US sovereign debt rating- heightening calls for a move out of US dollars as a reserve currency. Technically the USD could target 1.68 against sterling. Ultimately the weakness in the US dollar will ultimately lend to improved economic conditions with increased exports compensating for a public not spending.

The dollar was not helped by the news that GM is officially slipping into bankruptcy- although this has been widely expected it added to the dollars woes. The US government will step in to tale ownership of the car giant further spiraling the government spending.

This week a main focus will be on the rate announcements from the Bank Of England and the ECB. No further easing is expected from the BoE but there may be further talk or action in the QE programme.

In the eurozone CPI a measure of inflation came in at 0.0% for May- this is the lowest on record. This falling inflation indicator naturally raises the concern for deflation in the euro zone, however ECB president Trichet brushed these fears aside stating that ‘Long-term inflation expectations in the euro area, whether based on surveys or extracted from financial indicators, have been and continue to be firmly anchored at levels consistent with our definition of price stability.’

This week we will wait to see if the ECB look to cut interest further from 1% and also to see if the ECB expands its programme to buy covered bonds to revive private sector lending. Speaking in Marrakech, Trichet said ‘We expect to engage in a programme of around 60 billion euros that targets an important segment of the private securities market which has been particularly affected by financial market turbulence’. This in theory should weaken the euro and help sterling gain above the recent high of 1.1535.

On Friday we see non-farm payrolls from the US…an awful -525k is expected and anything -500k or better will be considered positive.

Report by Phil McHugh, Corporate Foreign Exchange

Receive daily currency rate updates and market commentaries direct to your e-mail daily FREE from Currencies Direct

Currencies Direct & Forex trading
Currencies Direct & Forex trading

Currencies Direct is a leading commercial foreign exchange company with offices in the UK, Australia and Spain and has offices across 5 continents. Currencies Direct’s head office and global trading centre is based in the City of London.

The contents of this report are for information purposes only. Currencies Direct and MarketClub Updates are compiled by Tom Nadir.

You can view new trading videos by clicking here, with my compliments.

Bookmark and Share

Posted in Currencies Direct Tagged: ailing US dollar, bankruptcy for GM, Currencies Direct, currency market updates, currency markets, currency updates, The Dollar index, USD tumbles