The Dollar had its first gain in 11 consecutive trading days on Friday, but still doesn't look like a real reversal will happen. The market was very bearish on the Dollar the past week as economic recovery is pacing and risk appetite grew stronger.US economy is facing large deficits but so do the other economies. NASDAQ and Dow Jones gained by 2.5% and 2.24% respectively. Crude Oil gained by 3.6% closing at 71.81$ a barrel and Gold (XAU) rose by 0.1% closing at 1006.9$ after reaching as high as 1024$ for an 18 month high. Looking ahead, CB Leading Index on Monday is expected at 0.8% versus 0.6% prior. Richmond Manufacturing Index on Tuesday is expected to show growth from 14 to 17. FOMC will release their Federal Funds Rate decision on Wednesday which is expected to remain at 0.25%. On Thursday, Existing Home Sales are expected to show a rise from 5.24M to 5.36M and Unemployment Claims are expected worse with 548K versus 545K prior. Core Durable Goods Orders are expected weaker with 0.9% versus 1.1% prior on Friday along with improved New Home Sales of 442K versus 433K.
The Euro gained versus the Dollar all week long as the Zew Economic Sentiment hit its highest level since April 2006 at 59.6, higher than 57.8 forecast. European Trade Balance reached its largest positive balance since 2002 growing to 6.8B versus 1.2B expected. Strong risk appetite along with positive growth prospects builds positive correlation to a rising demand for yield and the strengthening of the Euro. Overall, EUR/USD traded with a high of 1.4766 and a low of 1.4515. Looking ahead, On Wednesday Manufacturing PMI and Services PMI are expected to show growth but Industrial Orders are expected to gain by 2.1% only versus 3.1%. On Thursday, German Ifo Business Climate is expected higher at 92.1 versus 90.5. M3 Money Supply will be released on Friday and expected to gain by 2.7% versus 3% prior.
The Pound weakened versus the Dollar finishing as the weakest of the majors. Some indicators signaled improvement such as the RICS House Price balance which came out 10.7% versus -0.1%. Claimant Count Change came out slightly better than expected at 24.4K versus 24.7K forecast but still showed more people filed for unemployment benefits. If the UK's fiscal state deteriorates ratings agencies might downgrade the AAA credit rating. Overall, GBP/USD traded with a high of 1.6690 and a low of 1.6230. Looking ahead, MPC Meeting Minutes will be released on Wednesday, expected at 0-0-9. Revised Business Investment will be released on Friday and expected to remain -10.4%.