The U.S. Dollar turned in a mixed performance last week without moving much against any of the other major currencies.
Traders reported that the primary boost to the Dollar’s fortunes versus the Euro and Pound Sterling was the news out last Tuesday that the Standard and Poor’s rating agency had downgraded Ireland’s sovereign debt from AA+ to AA-.
Overall, the U.S. Dollar gained +0.2% versus the Euro, +0.1% against the Pound Sterling and +0.3% compared with the Canadian Dollar. It also fell by -0.3% against the Japanese Yen and by -0.7% versus both the Australian Dollar and the New Zealand Dollar. This was very similar in size and direction to the Dollar’s moves seen last week.
Markets observers continued to note the verbal support for USDJPY and the sustained threat of market intervention by the Bank of Japan. Together, these factors have kept the U.S. Dollar from falling too much further against the Japanese Yen. Nevertheless, the rate managed to make yet another 15-year low last week at 83.57.
Dollar Performance Mixed Last Week
The largest rise in the Greenback last week against the other majors was seen against the Canadian Dollar, where the U.S. Dollar gained +0.3%. The Loonie weakness came on the back of disappointing Canadian Retail Sales and Corporate Profits data indicated the recovery in Canada was weakening somewhat.
This modest but significant rise in USDCAD was followed in magnitude by the Dollar’s gains versus the Euro against which the Dollar rose +0.2% on the week, with the Greenback being buoyed versus the Euro by Ireland’s S&P downgrade.
Although the Greenback was largely unchanged versus the Pound Sterling by rising only +0.1%, the Dollar came off most significantly against the Japanese Yen where it showed an overall -0.3% drop on the week despite BOJ intervention threats.
Furthermore, a strong boost in gold prices mid-week after the Ireland downgrade sent the Australian and New Zealand Dollars significantly higher. They gained at the U.S. Dollar’s expense by each posting a +0.7% rise on the week.
Forex Market Implications
The forex market again did not move much last week, refusing to take the Dollar far in either direction against the other major currencies, although USDJPY did see a fresh 15-year lows in spite of verbal intervention by Japanese finance officials.
Furthermore, economic data released by the United States last week continued to point to the likelihood of a double dip U.S. recession — regardless of what stimulus measures are undertaken by the Federal Reserve.
It therefore continues to seem like just a matter of time before the true depreciated value of the U.S. Dollar becomes more obvious to those in the market.
Furthermore, in light of the recent credit downgrade to Ireland, the Euro would not be the currency to buy against the Greenback.
On the other hand, the Yen presents a good opportunity despite being close to 15 year lows, and selling USDJPY on a rally would seem to make sense, although watch for verbal or market intervention by the BOJ.
Also, the commodity dollars continue to be favored, despite some recent negative news that included the hung parliament result from recent Australian elections and weaker Canadian economic data than was expected.
Weekly Recap and Outlook for the U.S. Financial Markets and Dollar – 8/30/2010
The Greenback turned in a mixed performance last week, rising just a hair against the Euro, Canadian Dollar and Sterling and down against the Yen, New Zealand and Australian Dollar. The price action — which went both ways — began early in the week with news out on Tuesday that S&P had downgraded Ireland’s credit rating from AA+ to AA-. Read full report
Weekly Recap and Outlook for EURUSD – 8/30/2010
EURUSD traded in a limited range last week. The rate began the week by trading lower as Eurozone Flash Services PMI printed at 55.6 — as was widely anticipated — while Eurozone Flash Manufacturing PMI disappointed the market coming out at 55.0, versus a consensus of 56.3. Also, German Flash Services PMI came out higher than expected at 58.5 versus an expected number of 56.3, with the previous number revised downward to 56.5 from 57.3, and German Flash Manufacturing PMI which came out at 58.2 — versus an expected print of 60.9. Read full report
Weekly Recap and Outlook for GBPUSD – 8/30/2010
GBPUSD began last week near its weekly high of 1.5616 made on Monday but then traded softer to its weekly low of 1.5369 on Tuesday. The decline was spurred by comments from the BOE’s Monetary Policy Committee’s newest member — Martin Weale — who gave the general impression that he thought the BOE’s growth forecast might be too optimistic and that the U.K. economy also faced the risk of another recession, as well as increased unemployment, declining house prices and another banking sector crisis. Mr. Weale then went on to note that this might come from a fresh “sovereign debt crisis or it could be a new liquidity crisis in the private sector.” Tuesday also saw U.K. BBA Mortgage Approvals come out at the 33.7K level that was slightly worse than the market’s expectations of 35.3K. Read full report
Weekly Recap and Outlook for AUDUSD – 8/30/2010
AUDUSD gained a bit more ground in last week’s trading, largely due to a rally in gold spurred by Ireland’s S&P debt downgrade and weaker U.S. economic numbers. These fresh gains came in spite of the fact that the market was still engaged in processing Australian election news of a hung parliament for the first time in seventy years. The rate started the week by coming off sharply as a knee jerk reaction to the uncertain political climate resulting from the election. This saw the rate eventually trade down as far as 0.8857 before support emerged. Read full report
Weekly Recap and Outlook for NZDUSD – 8/30/2010
NZDUSD gained a bit more ground last week, boosted primarily by a rise in gold prices. The rate initially started Monday off with a firm tone, but then weakened after news that New Zealand Inflation Expectations were softer at 2.6% for the quarter compared with the previous 2.8% reading. This softened the rate down to a test of the important psychological 0.7000 level that was then later broken on Wednesday as the pair traded down to its weekly low point of 0.6945. Read full report
Weekly Recap and Outlook for USDJPY – 8/30/2010
USDJPY saw volatile trading last week, initially starting the week off on a firm note by making its weekly high of 85.69 on Monday. The pair then began trading lower after Prime Minister Naoto Kan and BOJ Governor Shirakawa had a phone discussion about recent forex market developments and “economic conditions at home and abroad”. This prompted the nervous market to think that the BOJ may not be taking immediate market action to reverse or slow the recent strength in the Japanese Yen. Read full report
Weekly Recap and Outlook for USDCAD – 8/30/2010
USDCAD saw choppy trading in the forex market last week, initially trading higher off of its low for the week of 1.0484 that was seen Monday. The rate continued rising sharply on Tuesday after Canadian Core Retail Sales came out at disappointing levels by showing a fall of -0.5% versus the expected rise of 0.1%. Also, the previous number saw a downward revision from -0.1% to -0.3%. Furthermore, Retail Sales were up by just 0.1% for the month, versus the consensus of a +0.4% rise. The previous Retail Sales number was revised down from -0.2% to -0.4%. Read full report
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