XM Group - Analytics

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    European Session – Firmer dollar pressures euro and oil prices

    In a mainly risk off market environment today, the dollar firmed up against the euro and sterling, while the safe haven yen gained.

    The euro fell to a more than three-year low against the Japanese currency to reach 120.51 yen, the weakest since March 2013. The single currency was also under pressure against the broadly firmer dollar, which was boosted even more after US jobless claims data. The more upbeat report pushed euro/dollar even lower. The euro lost the key $1.14 handle early in the European session and after the US data was released, the pair fell to $1.1305.

    Initial jobless claims declined by 4,000 in the week ending June 4, which was contrary to estimates for an increase of 3,000. This meant that the number of Americans filing for unemployment benefits dropped to a seasonally adjusted 264,000 last week and is a good indication that the US labor market remains strong. The data should give markets a sigh of relief after the latest dismal nonfarm payrolls report that showed the economy added only 38,000 jobs in May.

    The greenback bounced against the yen after the jobless claims data but the dollar’s move was more subdued than versus other currencies, since a predominantly risk averse environment helped support the safe haven yen.

    The dollar touched a fresh one month low of 106.24 yen prior to the US data before bouncing on the lower jobless claims number.

    Sterling extended losses against the dollar today to mostly trade below the key $1.45 level. The pair fell to a low of $1.4446. The primary driver of the pound lately has been the risk of the EU referendum which is just two weeks away. The British currency has been more sensitive to polls rather than to UK economic data. Trade data out of the UK today showed a smaller deficit as a result of higher exports.

    The more risk off sentiment has hurt commodities. Oil prices moved off multi-month highs but remain above the key $50 level. Brent crude slipped to $51.51 after having risen above $52 earlier in the day, while WTI oil dipped to $50.22 to move off an earlier high of $51.64.

    Surprisingly, gold prices managed to shrug off the stronger dollar and rose to as high as $1,267.18, registering a fresh three week high.

    Risk Warning: Forex, Commodities, Options and CFDs (OTC Trading) are leveraged products that carry a substantial risk of loss up to your invested capital and may not be suitable for everyone. Please ensure that you fully understand the risks involved and do not invest money you cannot afford to lose. Please refer to our full Risk Disclosure.

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