Currency Pair Overview Dollar Mixed After Poor Economic Data
Overall Despite U.S. PPI and retail sales numbers coming in well below expectations, the dollar held up rather well against the other major currencies. The greenback closed Tuesday’s trade stronger against the euro, Australian dollar and Swiss franc and lower against the pound, Canadian dollar and Japanese yen. The dollar found buyers as traders continue to be cautious and are using the currency as a safe haven. Equity markets continue to dominate and on days that equities move lower the greenback continues to find strength as traders become risk averse.
The Euro (Eur/Usd) The euro dropped approximately 100 pips on the day, despite the poor PPI and retail sales numbers this morning, as equity markets moved lower and risk appetite took a back seat. There were no European economic releases on Tuesday to influence the pair but German wholesale prices are scheduled for release tomorrow morning and may have an impact. The pair closed the day near the 1.3270 area and between the 20 and 100 day simple moving averages.
The Pound (Gbp/Usd) The pound strengthened on Tuesday testing the 1.4950 level before retreating as the dollar found buyers and closed just below 1.4900. The pound strengthened after profit at Goldman Sachs beat analysts’ expectations which caused optimism that the financial crisis may be coming to an end. Barclays and HSBC also rose on the day adding to the optimism. There were no U.K. economic releases this morning but RICS house price balance will be released at the start of tonight’s Asian session.
The Aussie (Aud/Usd) The Australian dollar weakened on Tuesday as equity markets moved lower and traders, once again, became risk averse. The dollar found buyers as traders moved into the greenback for its relative safety. The pair dropped 90 pips on the day, closing below the 0.7250 level. Australian business confidence gained 9 points over the previous months read as optimism grows that recent rate cuts will spur consumer spending.
The Cad (Usd/Cad) Despite equity markets in the U.S. closing lower and oil prices trading $50 a barrel, the Canadian dollar strengthened on speculation the global economic slowdown may be finding a bottom. Fed Chairman Bernanke said this afternoon that the sharp decline may be slowing. On the day, the pair lost approximately 50 pips, closing below the 1.2150 level but well off the lows of the day.
The Swissy (Usd/Chf) The swissy strengthened on Tuesday, gaining 50 pips after trading in a range of approximately 120 pips. The swissy had gained 100 pips overnight, retracing almost half of the declines seen on Monday. The dollar strengthened as traders sought a safe haven in light of U.S. equity markets falling and poor U.S. PPI and retail sales numbers this morning. The pair is currently testing the 20 day simple moving average as resistance.
The Yen (Usd/Yen) The yen moved much lower on Tuesday, closing below the 99.00 level, with most of the moves coming after the disappointing U.S. PPI and retail sales numbers this morning. Risk aversion came back into the market and traders moved into lower yielding assets such as the Japanese yen. The pair lost 110 pips on the day and closed below the 200 day simple moving average, which had provided support for the past seven days.