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The US Dollar and the Japanese Yen rose as oil prices led commodities lower in overnight trading, pointing to ebbing risk appetite and boosting the safety-linked currencies. Further gains may be ahead as European stocks react to dour earnings reports from Carrefour and Accor. May's Euro Zone Trade Balance report is also on tap.

Key Overnight Developments

• Oil Leads Commodity Prices Lower, Boosting Safety-Linked Currencies
• Euro, British Pound Turn Lower Against US Dollar in Overnight Trading


Critical Levels

7-17-09

The Euro saw a bit of selling pressure in the overnight session, losing as much as -0.4% against the US Dollar. The British Pound followed suit, dropping by as much as 75 pips to test a low of 1.6362 to the greenback.

Asia Session Highlights

With no market-moving data on the economic calendar and a muted session across Asian stock exchanges, lower commodity prices served as the guide for forex price action, pointing to ebbing risk appetite and boosting safety-linked currencies. Most notably, crude oil sank -1.2%, losing slipping below $62/barrel. Trade-weighted indexes of the average values of the US Dollar and the Japanese Yen added as much as 0.2% and 0.6%, respectively.

Euro Session: What to Expect

The Euro Zone Trade Balance is expected to post a flat result in May after showing a surplus of 2.7 billion euro in the previous month. The same period saw consumer confidence advanced for the second consecutive month to the highest since November 2008, suggesting import volumes may print a bit higher than April. That said, there seems to be some room for an upside surprise considering the Euro lost a over 6% on average against the currencies of the region's main trade partners, making European-made goods comparatively cheaper for overseas buyers all the while discouraging purchases of foreign products.

Turning to risk trends, European stock exchanges may be weighed after Accor SA, the continent's biggest hotel operator, said second-quarter sales fell 9% as the global downturn saw companies trim business travel expenses while consumers cancelled vacation plans. Similarly bad news comes out of Carrefour SA, Europe's biggest retailer, who said that profits dropped 1.2% in the three months to June to register the second consecutive quarterly decline on sluggish French and Spanish spending. Such news will weigh on recent optimism about the prospects of a global economic recovery, boosting the safety-linked US Dollar and Japanese Yen.

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