Equity Markets Rally Behind Dollar Strength

Daily Forex Fundamentals | Written by AC-Markets | Aug 08 08 22:29 GMT |

The Usd finished stronger against most of the G10 in the late US session. The EurUsd suffered additional losses trading testing 1.50 as a current support level, while UsdJpy maintained its current level of 110 on the aggressive shift in market sentiment. The GbpUSd declined sharply, trading through our previous projection of 1.93 to 1.92 on weak economic conditions. Commodity prices continued this week’s slide to the downside, with oil retracing back to levels we saw back in April indicating that new support may be found at 110. If energy prices remain contained, this will provide further room for the dollar to appreciate. Bonds continued to sell off across the curve on increasing risk appetite, the 2yr yield in particular increased 7bps. Currency Traders are looking for the ECB not to raise rates next meeting, signifying a move towards a softening monetary policy. As most of the G10 braces for a down cycle, the Usd may have reached a floor, nevertheless we should look for a consistent chain of positive economic data before we position ourselves for an extended rally into the end of the year.

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