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    European Session – Dollar weighed down by Fed as Euro eyes 1.14 dollars

    After a positive close in Asia, equities in Europe were mixed in quiet trading with a light calendar for European data. Trading is also expected to be very thin in the US session due to Columbus Day celebrations.

    The US dollar drifted lower for much of the day but bounced back from three-week lows. The greenback was weighed down by comments from Fed Vice Chairmen Stanley Fischer over the weekend. Speaking at the IMF’s annual meeting in Peru, Fischer said that while the Fed does not anticipate the effects of the recent global developments to have a major impact on the US economy, the recent jobs report was disappointing and the Fed is closely monitoring developments.

    Meanwhile, the euro was supported by comments from ECB executive board member Benoit Coeure, who said that it is “really premature to talk about concrete measures in terms of broadening quantitative easing”. The remarks dampened expectations of immediate action by the ECB despite Mario Draghi’s assurance on Saturday that the ECB stands ready to expand its QE program if necessary.

    The single currency extended Friday’s gains to peak at 1.1394 dollars but eased to 1.1369 dollars in late European trading on comments by another Fed official. Atlanta Fed President Dennis Lockhart reiterated his expectations of a 2015 rate hike at a speech in Orlando. Lockhart said that rates could still go up in October or December if the data was strong enough despite the lower-than-expected outlook for inflation.

    The greenback maintained a tight range against the yen on Monday and stood at 120.07 yen in late European trading. The pound advanced sharply against the dollar to climb to 1.5365 dollars but later pulled back to 1.5347 dollars.  Sterling also moved higher against the euro, rising to 0.7407 pounds per euro in late European session. The aussie also took advantage of dollar weakness to rise to near 8-week highs of 0.7351.

    With no major releases out of the US today and tomorrow, attention will now turn to tomorrow’s data out of Asia and Europe. Australian business confidence and Chinese trade data will be the main focus in tomorrow’s Asian session, while the German ZEW Survey and UK inflation figures will be closely watched in European trading.

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