By Greg Holden
The events of this week have resulted in a rather sporadic and choppy trading environment.
Dismal GDP figures from Britain pushed harshly on sterling’s recent strength. Meanwhile, President Obama’s State of the Union address left many investors optimistic about broader tax overhauls and a possible reduction in corporate taxes, but speculators have already begun to anticipate Congressional gridlock instead of the cooperation necessary to undertake such measures.
Following today’s surprise jump in US unemployment claims, the greenback’s prices against the other major currencies appears uneasy. The EUR/USD was moving higher, breaching 1.3720 this morning, while the GBP/USD also rose towards 1.5980 before paring its recent gains and currently trading at 1.5955.
Rising consumer confidence has helped lift risk appetite, leading many traders away from the greenback and precious metals and back into higher yielding assets such as the EUR and CHF. But many have stated that the recent rise of these riskier currencies was too rapid and a technical correction could be developing before the week’s close.
Tomorrow’s Advance GDP publication from the United States (13:30 GMT) represents the only remaining figure to carry a significant impact on the major currencies this week.
The median estimate among the Market News International survey of economists is for a growth of 3.5%, but other forecasts range from 2.9% to 5.4%. Most investors are expecting a moderate level of growth in the US economy, in line with Obama’s overtures towards economic recovery in his State of the Union address this week.
It is possible that such a positive level of growth could signal another buy-in to American equities, pushing the USD higher in the short-run prior to the week’s end. This would also support the notion of a technical correction to the recent downturn in dollar values against most other currencies.
Forex Market Analysis provided by ForexYard.
© 2006 by FxYard Ltd
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