The U.S. Dollar finished sharply lower. The Dollar has closed down four out of the last five sessions. The strong rally in equity markets today drove up demand for higher yields as investors have become more optimistic about a global economic recovery.
As expected the European Central Bank left its benchmark interest rate unchanged at 1.0%. The ECB is optimistic about an economic recovery, but it may not be as smooth as desired. In addition the ECB expressed some concerns about the value of the Euro but is not expected to do anything about it unless exports are adversely affected. ECB President Trichet said a strong Dollar policy from the U.S. is important.
The Bank of England also left its benchmark interest rate unchanged at 0.50 % and left its asset-buyback program unchanged. The main trend turned up on the daily chart on a trade through 1.6047. The next upside target is a 50% price at 1.6117 and an old top at 1.6124. Upside momentum can push the market through these prices to 1.6200.
Higher energy and equity prices are helping to weaken the USD CAD. This currency pair is trading at a new low for the year. Traders are a little concerned about how much higher the Canadian Dollar will be allowed to appreciate before the Bank of Canada becomes concern about its adverse effect on exports.
Demand for higher risk is drove up the NZD USD and AUD USD. Unemployment surprisingly fell in Australia. This news triggered a huge surge to the upside in the Aussie as traders are now speculating that the Reserve Bank of Australia will hike interest rates again before the end of the year.
The New Zealand Dollar closed up but gains could be limited over the short-term because of a statement by the Reserve Bank of New Zealand which expressed concerns about the high price of the currency and its possible adverse effect on the current economic recovery.
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