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    European Session – Euro rallies above $1.09, oil rises to $34

    The US dollar was broadly weaker today, while sterling and the Australian dollar were one of the strongest performers.

    The pound advanced after reacting positively to as-expected UK fourth quarter GDP data. The preliminary estimates showed the British economy expanded by 0.5% between October to December of 2015 compared to the previous quarter. While being in line with estimates, it was an improvement on the third quarter’s 0.4% rate. Sterling gained 0.7% versus the dollar after hitting a session high of 1.4345.

    The euro traded back above the key $1.09 level against the dollar and spiked to the highest level in a week at 1.0932.

    The euro shrugged off disappointing Eurozone confidence data but the release of German inflation data gave it an extra boost. Headline CPI came in largely as expected year-on-year at 0.5% in January and gave the market relief that it was not lower than forecast. Friday’s Eurozone CPI number now comes into focus. The flash annual CPI rate is expected to rise to 0.4% in January from 0.2%.

    Meanwhile the euro beat yesterday’s 1-year high versus the Swiss Franc to hit 1.1078, the highest level since the Swiss National Bank removed the 1.20 CHF floor in January 2015.

    The Australian dollar was a notable outperformer today versus the greenback, piercing the key $0.71 level to hit a three-week high, in part due to a rise in risk appetite.

    Another big mover was oil. US oil futures hit a three-week high above $34 on expectations of production cuts. Russian oil minister Novak said today that his country is willing to arrange a meeting with other oil producers next month.

    The gain in oil prices helped the oil-linked Canadian dollar to rise to its strongest level in three weeks against the greenback. Consequently, USD/CAD dipped briefly below $1.40.

    The yen remained weak today, partly due to disappointing Japanese retail sales numbers and the upcoming risk of the Bank of Japan policy announcement on Friday. USD/JPY traded just below the key 119 yen level.

    Data out of the US consisted of weekly jobless claims, durable goods and pending home sales. The headline number for durable goods orders tumbled 5.1% in December. The disappointing data was overshadowed by better initial jobless claims data. The number of Americans filing for unemployment benefits fell last week by a seasonally adjusted 16,000 to 278,000 in the week ending January 23. Other US data showed pending home sales made a small gain in December 2015 and were 4.2% higher than December of 2014.

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