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‘Basket Of Currencies’ Rumor Emerges

Discussion in 'Forex Daily News & Outlook' started by mercaforex, Oct 6, 2009.

  1. mercaforex

    mercaforex New Member

    Jul 1, 2009
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    By Mercaforex

    The USD turned in a rather chaotic day of trading on Monday as it put pressure on the EUR and GBP early on and then found itself giving back ground. The performance of the greenback mirrored the turnaround on the U.S. equity markets. Before Wall Street opened for trading the currency market was rather cautious but upon the good winds blowing risk appetite increased and the USD slumped. The ISM Non Manufacturing PMI survey was released yesterday and provided a dose of better news with a 50.9 reading compared to the estimate of 50.0.
    There will be no major economic data from the U.S. today but the currency market will have a couple of interesting bits of news to chew on. The first news to take under consideration is that Australia raised its key interest rate by a quarter of a point last night. The second piece of news comes from The Independent newspaper from the U.K. which reported early this morning that ‘secret talks’ are underway involving the Gulf countries and China, Russia, France, and Japan to replace the USD with a ‘basket of currencies’ when trading crude oil. This story was quickly denied by a Saudi minister, but the article will certainly cause a stir and be a topic of discussion. If there is any merit to the article it must be pointed out that undertaking such a move would take a significant amount of time. This is not the first time such an idea has been circulated and it will be of interest to watch how investors filter this news. The next two days will remain rather quiet with data until Thursday from the U.S. when weekly Unemployment Claims are presented. Thus the USD will find itself the recipient of risk leveraging. The greenback did loss ground to both the EUR and GBP as Monday ended and if Wall Street climbs again we could see that the USD continues to falter.

    The EUR struggled in early trading against the USD on Monday but made a swift recovery against the greenback as the day grew. The European Union released a few reports yesterday and they turned in mixed results as the Retail Sales showed a slight improvement per its estimate but the Sentix Investor Confidence reading produced a negative turn coming in below expectations. It will be a very quiet day of data from Europe but that will change tomorrow, when the German Factory Orders figures will be presented and the broad European Final GDP numbers will be published. Therefore the EUR may find one additional day of strong dollar centric trading until investors will be able to set their sights squarely on the health of the German economy. Also Thursday will present the ECB and its monthly interest rate statement and press conference with Jean-Claude Trichet, the ECB President. The EUR recovered its pace against the USD yesterday and finds itself at the higher part of its range and this resurgence will have to be watched today.

    The Sterling managed to find its footing against the USD on Monday after showing initial signs of weakness. The U.K. released its Services PMI numbers and they came in better than expected with a 55.3 reading compared to the estimate of 54.6. Today the Manufacturing Production data is on schedule and anticipated to show a 0.4% increase. Tomorrow will be a light day of releases from the U.K. but on Thursday the Bank of England’s MPC meeting results will be brought forth. Like the U.S., the U.K. economic figures continue to show that stability has been reached but questions remain about the type of recovery that will emerge. The Sterling did show some strength yesterday and the GBP will get another chance today to see if it can renew more solid ground.

    The JPY gained against the USD on Monday pushing to new highs against the greenback. Continuing to find takers even as it climbs in value, the JPY has the attention of all including investors and the government of Japan. The growing strength of the JPY will certainly bring new comments from the Bank of Japan if its forward motion keeps pace. Traders will certainly test the JPY and must monitor its momentum.

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