Overall: The same old story continues to repeat itself. As economic releases give evidence that the global economic recession is close to a bottom, traders become bullish on riskier assets and sell the dollar. The majority of economic releases, from every region, have been positive recently leading traders to speculate the worst is over and become risk tolerant. On Friday the dollar weakened significantly across the board, dropping against all of the other major currencies. The euro led the way against the greenback, and the other majors followed suit, after it was reported that South Korea’s National Pension Service, which had $187 billion of assets at the end of 2008, announced it had pared its allocation for U.S. Treasuries over the next five years.
The quarterly preliminary GDP figures were released this morning and showed that the U.S. economy contracted at a 5.7% annual pace in the first quarter, resulting in the worst six month performance in five decades. The -5.7% number was smaller than the government estimated last month and larger than economists had forecast. According to the University of Michigan’s index of consumer sentiment, confidence among U.S. consumers rose this month to the highest level since September. The number came in at 68.7, higher than the previous read of 67.9 and also higher than the expected number of 68.0.
The Euro (Eur/Usd) The euro soared on Friday, gaining 210 pips and closing the day above the 1.4150 level. The prospects of a stronger global economy is leading Traders to continue to be risk tolerant, load up on higher yielding assets and sell the dollar. The pair closed at the highest level since December 2008. The euro continues to trade above all of the daily simple moving averages.
The Pound (Gbp/Usd) Cable gained almost 250 pips on Friday, closing near 1.6190, the highest close since October 2008. The pair gained 280 pips for the week and posted its biggest monthly gain (1400 pips) in almost 25 years. U.K. house prices rebounded unexpectedly in May, matching its biggest gain since 2006. The average cost of a home jumped 1.2% to 154,016 pounds after declining 0.3% in April, according to Nationwide Building Society. U.K. consumer confidence matched the highest level in almost twelve months this month as the sentiment index stayed at -27, the same as April.
The Aussie (Aud/Usd) As traders continue to be bullish on the global economy and move more and more into higher yielding assets, the aussie continues to strengthen. U.S. equity markets closed higher on Friday after a strong push during the final hour of trading and further bolstered the Australian dollar, along with gold prices gaining almost $18 an ounce. The pair gained 175 pips on the day, closing above the 0.8000 level.
The Cad (Usd/Cad) Oil prices continue to rise, gaining another $1.66 to close at $66.64 a barrel on Friday. U.S. equity markets closed higher after a strong close and both helped the Canadian dollar to strengthen against its U.S. counterpart. The cad dropped 230 pips as the dollar weakened in the broad market and closed just below the 1.0900 level.
The Swissy (Usd/Chf) The swissy dropped significantly on Friday, losing 170 pips and closing near the 1.0670 level. The Swiss KOF economic barometer came in at -1.86, lower than the expected number of -1.80 and level with the previous read. The pair continues to trade well below all of the daily simple moving averages.
The Yen (Usd/Jpy) Despite equity markets closing higher on Friday, after a strong push during the final hour of trading, the yen dropped 160 pips, erasing Thursday’s gains and closing at 95.25. the pair moved back the 20 and 100 day simple moving averages, which had been broken to the upside on Thursday, and closed below all of the daily SMA’s. For the week, the pair gained 60 pips.