The Dollar Holds On Despite a Slight Rise in Oil

The Usd carried its gains into the European session trading higher against most of the G10. The EurUsd continued to slide trading with a 1.56 handle, while the UsdJpy remains between the mid and high 107 price. The GbpUsd traded through the 1.99 level to 1.98, based on negative economic data out of the UK. Equity markets traded lower in the US and Europe based on deteriorating economic conditions in both regions. Bonds picked up steam, as the 2yr treasury yield tightened by 21bps in an abrupt move by traders to counter downside risks in other asset classes in the financial markets. Commodities started to recover today with oil higher at 125, and gold up as well at 925.

German IFO numbers dropped to its lowest level since 2005 at 97.5 vs. a consensus figure of 100. The downward trend in Eurozone economic growth is a serious issue for the ECB. It will be a difficult task for the ECB in devising a plan to address both inflation and growth pressure. The EurUsd continued to slide on the negative data out of Germany and the recent decline in oil prices, which provided additional strength to the dollar. In the UK, retail sales fell 3.9% vs. 2.5% expected, this is the largest decline since the data has been recorded. The cable fell over 100 pips due to the negative data, and our expectations for trading in the near-term are between 1.98 and 2.00. There is speculation that some of the Central banks in the G10 are expected to move into a softening cycle sooner than expected, giving way to further dollar strength.

The Usd continues to trade positively in light of a sharp drop in US equities and a minor move to the upside in oil. Jobless claims rose by 34k to 406k, which was worse than the consensus figure of 379k. The rise in jobless claims is more evidence that US economy is still in a down cycle with a little signs of a recovery in the near future. Existing home sales fell 2.6% vs. 1.0% est. which did little to move the dollar, but makes it increasingly difficult for the Fed to hike rates without further damaging growth.

AC Markets
http://www.ac-markets.com

Disclaimer: This report has been prepared by AC Markets (thereof ACM) and is solely been published for informational purposes and is not to be construed as a solicitation or an offer to buy or sell any currency or any other financial instrument. Views expressed in this report may be subject to change without prior notice and may differ or be contrary to opinions expressed by Salesperson or Traders of ACM at any given time. ACM is under no obligation to update or keep current the information herein, the report should not be regarded by recipients as a substitute for the exercise of their own judgment.