Monday, 18 Oct 2010

Dollar Cuts Gains as Risk-Appetite Advances

The U.S. dollar began this week's trading with profits against most of the major currencies. However, during today's session the dollar erased all of its gains. The dollar lost about 150 pips against the euro, and the EUR/USD pair is trading near the 1.4000 level. The dollar lost about 100 pips against the British pound as well.

The dollar erased its gain versus most of the major currencies as an advance in stocks on the prospects for more easing by the Federal Reserve boosted demand for risker assets, such as the euro and the pound. As a result, dollar-dominated commodities has rallied; gold rose from a daily low of $1352.20 an ounce and is now trading near $1,375 an ounce. Crude oil closed a bullish session as well, and a barrel of crude is now trading near $83.30.

Looking ahead to tomorrow, traders are advised to follow the German ZEW Economic Sentiment release. Analysts' expectations are that the result will be negative. This will mark the second negative result in a row, for the first time since March 2009. The euro might correct today's gains as a result.