After a period of steady appreciation, the USD took a sharp nose dive at the end of European market hours to close yesterday's trading at 1.4364 versus the EUR, 1.6284 against the Pound, and 1.0877 against the CAD. The greenback fell due to several reasons that are linked to thin summer trading.
First, with Crude Oil advancing from industrial growth worldwide, the USD is experiencing some downward pressure from commodity purchases. With growth being forecast on the horizon, safety investments like the USD are losing some of their appeal. While the Gross Domestic Product (GDP) of the United States shrank less than expected, many economists are anticipating a rally in US stocks, Crude Oil prices, and riskier investments. These all point to further downward pressure on the Dollar in the days ahead. As such, yesterday's sharp drop was inevitable.
If today's figures on Personal Income and Personal Spending in the US confirm the rising trend of growth, the USD could see some added downward pressure. The University of Michigan's Consumer Sentiment report will also give credibility to these assumptions if it reveals market optimism is on the rise. Traders may anticipate a bearish Dollar if economic news continues to support these latest trends.