Wednesday, 5 Aug 2009

Dollar Bearishness Returns after a Late Surge in Equities

Sharp gains from financial stocks offset the pressure put earlier on the equity markets by disappointing July U.S service sector report. The employment portion of the report worsened from a month earlier. This was interpreted as an early indicator for the July U.S. nonfarm payrolls report due Friday and putting downward pressure on riskier assets. The late equity gains helped the EUR and other risk sensitive currencies recover from intraday lows against the Dollar and Yen.

However, overall the EUR is little changed from yesterday, trading at $1.4420 from $1.4400 late Tuesday. The Pound has experienced a late surged, prompted by the gains from financial stocks, reaching a high of 1.7042 against the Dollar. However, it was unable to sustain the sharp gains and is currently trading near the 1.700 level.

Looking ahead to tomorrow, another heavy news cycle is expected from the U.S, Euro-Zone and the U.K including the British MPC rate Statement and Official Bank Rate due to be released at 11:00 GMT, the Minimum Bid Rate for the EUR at 11:45 GMT as well as the ECB Statement at 12:30 GMT and the U.S Unemployment Claims also at 12:30 GMT. This is sure to be another volatile and important trading day.