The US dollar was trading higher against the yen and euro in Wednesday's European session. There markets were closed in the US on Wednesday, as July 4 was the country's Independence Day.
The EUR/USD rate was 1.25 and the USD/JPY rate was at 79.82 at 1:12 PM New York time. The resource linked currency; the Australian dollar was still trading above parity against the greenback at 0.97 Australian dollars. The Indian rupee closed lower against the greenback as well, at 54.49. Despite the dollar rate increasing, the US economy may be slowing down. This has been indicated by a slump in factory orders. The Federal Reserve may have to introduce quantitative easing if weak economic data keeps pouring in. Foreign exchange traders feel that quantitative easing would be the right step for boosting the economy.
Euro weakens against 12 major currency counterparts
During the European trading session on Wednesday, the euro weakened against 12 of its 16 most important currency counterparts. German services data showed contraction, and that was the cause of weakening for the euro. The euro was trading at 100.10 versus the Japanese yen at 1.12 PM New York time. Against the US dollar, the euro was trading at 1.25.
The Swedish krona hit a 12 year high against the euro (at 8.65 per euro) as well, as Sweden's central bank did not cut its interest rates. On Thursday, the European Central Bank's actions will be watched by currency traders, as a major interest rate cut is expected.
The yen was trading higher against the euro, but lower against the US dollar in Wednesday's European session. At 1.12 PM New York time, the EUR/JPY rate was at 100.10, and the USD/JPY rate was at 79.82. The USD/JPY rate is expected to stay below 80.00 levels in the near term. However, the euro is likely to strengthen against the yen on Thursday, as a European Central Bank interest rate cut is expected.
The yen was also trading higher against the British pound due to the Libor scandal that has affected the British financial scenario negatively. The GBP/JPY trading rate was at 124.34.
Oil prices down as traders consolidate profits
Crude oil was trading lower on Wednesday. This was caused by traders consolidating their profits, and waiting for interest rate cuts from global central banks. At 11:25 AM GMT, Brent crude in London (at the ICE Futures Europe Exchange) was trading at $100.02 per barrel. At the New York Mercantile Exchange, the oil price was $87.06 per barrel. It is worth noting that overall crude oil has jumped from last week, where it was at $77 levels before the results of the European Union summit.
The trading volumes were also low, as the US markets were closed for the Independence Day holiday. Oil analysts have pointed out that the market focus could well shift to supply issues for crude oil. Iran has threatened to block the Strait of Hormuz, through which approximately 20% of the world's oil shipments pass. However, if Iran adopts a more restrained stand, then oil shipments are unlikely to be affected.
This article was prepared by Forex Minute
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