US Dollar- the pain continues...
The US Dolar was hit hard on Friday and in Asian trade this morning as expectations of a rate cut on Wednesday night continues to rise.
The market has completely priced in a 25bp cut from 4.75% to 4.50% while a 50bp cut is given a 55% probability. Although, it may not be a forgone conclusion as the Fed does not like to be pressured into a decision by the markets.
The USD slid to new all time highs against the EUR (can you still remember when following the launch in 2000 they were hoping it would get back to parity?) while the commodity and high interest yielding currencies of the CAD and AUD hit 33 and 23 year highs respectively.
Moreover the Dollar index, the value of the USD against a basket of six major currencies, hit its lowest level since inception 30 years ago.
Commodities also benefited from the weaker USD with Oil climbing to yet another record high, breaching $93 a barrel, while gold hit a 27 year peak at $794.40. Significantly oil has breached its highest inflation adjusted price for the first time since the Iran cut exports way back in 1980.
The GBP has also benefited from the weaker USD hitting new highs, however the gains have not been as dramatic as the EUR and AUD with the expectations of rate cuts in the UK restricting gains.
The possibility of a rate cut in the UK is in contrast to others like the EUR and AUD where increases are expected by early next year if not early.
With the GBP not increasing as much as other currencies against the USD the GBP crosses have fallen. GBP/EUR has slipped to key support just above the low seen in April 06. Against the AUD and CAD the GBP has sunk to levels not seen since the late 90s.
Expect the currency markets to remain volatile until the Fed announcement on Wednesday with a clearer trend likely to emerge after.
Most of the focus will be on the Fed announcement on Wednesday but there is also a string of other data due this week.
The contents of this blog are for information purposes only. It is not intended as a recommendation to trade or a solicitation for funds. The Wise Money Blog cannot be held responsible for any loss or damages arising from any action taken following consideration of this information.
The market has completely priced in a 25bp cut from 4.75% to 4.50% while a 50bp cut is given a 55% probability. Although, it may not be a forgone conclusion as the Fed does not like to be pressured into a decision by the markets.
The USD slid to new all time highs against the EUR (can you still remember when following the launch in 2000 they were hoping it would get back to parity?) while the commodity and high interest yielding currencies of the CAD and AUD hit 33 and 23 year highs respectively.
Moreover the Dollar index, the value of the USD against a basket of six major currencies, hit its lowest level since inception 30 years ago.
Commodities also benefited from the weaker USD with Oil climbing to yet another record high, breaching $93 a barrel, while gold hit a 27 year peak at $794.40. Significantly oil has breached its highest inflation adjusted price for the first time since the Iran cut exports way back in 1980.
The GBP has also benefited from the weaker USD hitting new highs, however the gains have not been as dramatic as the EUR and AUD with the expectations of rate cuts in the UK restricting gains.
The possibility of a rate cut in the UK is in contrast to others like the EUR and AUD where increases are expected by early next year if not early.
With the GBP not increasing as much as other currencies against the USD the GBP crosses have fallen. GBP/EUR has slipped to key support just above the low seen in April 06. Against the AUD and CAD the GBP has sunk to levels not seen since the late 90s.
Expect the currency markets to remain volatile until the Fed announcement on Wednesday with a clearer trend likely to emerge after.
Most of the focus will be on the Fed announcement on Wednesday but there is also a string of other data due this week.
The contents of this blog are for information purposes only. It is not intended as a recommendation to trade or a solicitation for funds. The Wise Money Blog cannot be held responsible for any loss or damages arising from any action taken following consideration of this information.
Labels: FED, interest rates, Weak Dollar
posted by Wise Money @ 7:19 PM
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