Trichet Triggered Dollar Rally | IFCM UAE
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Trichet Triggered Dollar Rally - 6.5.2011

Asian stock markets dropped on Friday with oil and metals prices sharp declines. Japanese Nikkei Stock Average lost 1.35% by the end of Asian trading session, following broad losses in the US stock market. DJIA fell by 1.1%, Nasdaq - by 0.48% and S&P 500 declined by 0.91%. Oil prices fell below 100 dollars per barrel on Thursday. Crude oil for June delivery lowered to 98.25 yesterday, the lowest since March 17, recovering again above 100 dollars per barrel in Asian trading hours. Gold futures also dived yesterday, touching 3-week low at 1462.50 dollars per troy ounce. Currencies markets were mostly little changed this morning after yesterday’s fluctuations. US Dollar Dollar gains were limited today ahead of US labor market reports, which may show recovery is tempered. Yesterday initial jobless claims data revealed a 43000 jump in new applications, so as its overall quantity surged to 474000 in the week ended April 30. As a consequence the dollar gave back a bit of ground during Asian trading session before the key labor report is released later in the global day. According to estimations, US employers added 185000 jobs in April or even less after a 216000 non-farm payrolls increase in the previous month. Euro Yesterday the European Central Bank left its benchmark interest rate at 1.25%. ECB president Trichet signaled the central bank may wait until after June to lift borrowing costs again. As for now policymakers will monitor inflation risks “very closely,” Trichet said during his press conference. Inflation accelerated to a 2.8% annual pace last month. Trichet also added “we are never pre-committed and we can increase rates whenever we judge it appropriate”. Pair EUR/USD fell yesterday from 1.49 to 1.45 and traded in a narrow range today 1.4532-1.4587. Japanese Yen The yen weakened after touching a seven-week high 79.56 against the dollar on speculation the central bank may intervene to curb recent gains of the national currency that may hurt the competitiveness of the nation’s exporters. Japanese authorities repeated they will closely watch the foreign exchange market, while Economic and Fiscal Policy Minister Yosano said the currency’s volatile movements are troublesome. Pair USD/JPY rose from 79.56 yesterday to 80.60 today. Australian Dollar Australian dollar was well supported against all its major peers after the Reserve Bank said higher interest rates may be needed to contain inflation. The central bank said in its quarterly monetary policy statement today that “further tightening of monetary policy is likely to be required at some point for inflation to remain consistent” within a target of 2%-3% in the medium term. Economic growth forecast for the current year remained unchanged from a February estimate at 4.25%, but consumer prices will advance to a 3.25% annual pace, from the previous 3% expectation, and core inflation will accelerate to 3% from 2.75%, according to the Reserve Bank of Australia outlook. Pair AUD/USD recovered from its two-week low 1.0536 to 1.0733 in Asian trading hours. British Pound Yesterday UK monetary policy makers led by Governor King also left interest rates unchanged at 0.5% as worsening economic data reduced the need for higher borrowing costs to curb inflation, which exceed more than twice the central bank’s target at 2%. However in March inflation lowered to 4% after five months acceleration to a more than two-year high at 4.4% in February. Economic data released on Wednesday showed house prices declined for the first time in three months, while construction growth unexpectedly dropped to a four-month low. Pair GBP/USD traded in a range during Asian trading session after a four-days decline from 1.6635 to 16358.
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