Dollar Support Tested

Although US confidence will remain fragile, the dollar continues to offer important medium-term value

The dollar recovered back to around 1.5840 during Monday. The results from Bank of America were stronger than expected which provided some initial support to the US currency, although the impact was less than that seen following the results last week. The dollar will gain some underlying backing if there is an improvement in risk appetite towards the banking sector.

Oil prices gained some support on fears over hurricane damage to oil installations and this was a negative factor for the US currency in cautious trading with underlying dollar sentiment still weak.

US leading indicators fell 0.1% for June after a revised 0.2% decline the previous month which will tend to reinforce a lack of confidence as fears over trends continue. These fears were increased by weaker than expected results from American Express which reinforced the expectations of weakness in the consumer sector.

The dollar was unable to sustain gains and weakened back to test levels beyond 1.59 later in US trading. A key feature is likely to be a lack of confidence in all the major economies which may encourage range trading as the Euro is likely to hit significant selling pressure on gains from current levels. The Euro continued to probe levels above 1.59 in Europe on Tuesday.

Investica
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