Overall: The dollar closed mixed, overall, on Tuesday as the greenback erased gains made overnight after the consumer confidence numbers posted higher gains than expected. The dollar has been trounced for the past few weeks and after the long Memorial Day weekend, traders seem to bet that the gains posted by major currencies against the greenback were too much too fast. The Sunday Asian session started slow but as traders came back to their desks, the dollar was bought in the broad market. That trend continued into the European session until the release of the CB U.S. consumer confidence data at which time traders again became bullish on the global economy and abandoned the dollar for higher yielding assets. European and U.S. equity markets closed higher, with the DOW gaining almost 200 points and the S&P closing back above the 910 level.
U.S. Consumer confidence rose sharply in May after improving considerably in April. The number came in at 54.9, much higher than the expected 42.7 and higher than April’s 40.8 reading. The Expectations Index increased to 72.3 from 51.0 while the Present Situation Index increased to 28.9 from 25.5. Consumers' assessment of overall current-day conditions improved again. Those claiming business conditions are good rose to 8.7% from 7.9%, while those claiming business conditions are bad increased to 45.3% from 44.9% last month.
The Euro (Eur/Usd) The euro traded in a wide range on Tuesday, weakening overnight before strengthening after the U.S. consumer confidence numbers, and closed the day lower by only 35 pips. The pair had tested 1.3850 intra-day but closed near 1.3990. The euro continues to trade above all of the daily simple moving averages.
The Pound (Gbp/Usd) Cable traded in a wide range of approximately 190 pips on Tuesday, moving lower during the Asian and European sessions but reversing the trend during U.S. trading hours and closed higher by almost 20 pips. The pair has moved higher for six of the past seven trading days, gaining more than 750 pips and moving above the 200 day simple moving average.
The Aussie (Aud/Usd) Higher equity markets propelled the aussie higher as the pair pared overnight losses on the strength of traders shunning the dollar for higher yielding assets after U.S. consumer confidence numbers led to optimism in the global economy. The pair gained 40 pips after trading in a range of 180 pips.
The Cad (Usd/Cad) The Canadian dollar strengthened against the dollar on Tuesday, once again in response to better than expected U.S. consumer confidence data and a rise in equity and oil markets. The consumer confidence numbers indicates that the global economy may rebound quicker than expected and provided a spark for higher yielding currencies. The pair lost 75 pips and closed near 1.1160.
The Swissy (Usd/Chf) The swissy traded in a wide range of 115 pips on Tuesday, paring most of the gains made overnight and closing higher by approximately 10 pips. The pair continues to trade well below all of the daily simple moving averages. The Swiss UBS consumption indicator came in at 0.92, slightly lower than the previous month’s read of 0.99.
The Yen (Usd/Jpy) The yen gained 20 pips on Tuesday, closing at 95.00 after trading in a range of 65 pips. The pair moved higher during the U.S. session as the Japanese yen weakened in response to U.S. equity markets moving higher after better than expected U.S. consumer confidence numbers. The pair continues to trade below all of the major daily simple moving averages.