The Dollar’s bullish rally didn’t last for more than a day as it seems with the price action over the past 24 hours having reversed and the US currency gave up most of its recent gains against the rest of the major currencies. The Dollar had appreciated on the back of the strong NFP report on Friday but yesterday bearish comments rumored to have come from President Obama’s lips drove the Dollar significantly lower.
The rumour was that President Obama commented on the recent rise of the US currency over the last weeks and said that a strong Dollar is not the best option for the US domestic economy. Even though the rumor was quickly dismissed from US officials it doesn’t mean that the President didn’t actually say it or that’s it doesn’t represent the truth.
A strong domestic currency most of the times is not a positive drive for the economic growth of a country, mainly because it affects exports’ prices and inflation growth. As such a country will always prefer to keep their currency strong and stable but at the same time as “cheap” as possible. It goes without saying that this round of comments, even though denied, drove the Dollar lower and a better than expected string of reports from the Euro area allowed the other major currencies to breathe a little bit easier.
The Euro popped above the 1.1300 area on the back of the rumored Obama comments and a better than expected German Trade report allowed the Single currency to rally for around 200 pips since last Friday’s lows. However we believe that the sentiment has not changed at all and actually traders should consider taking this advantage to sell Euros higher ahead of continued doubts over Greece’s negotiation talks.
Cable also rose yesterday and climbed above the 1.5300 barrier on the back of the Dollar’s weakness. We had no fresh news from the UK this week but this is about to change today and the next few days. Trade Balance reports, Industrial Production numbers and BoE policymakers’ speeches are expected to drive the currency this week and the sentiment at this point is towards higher levels with the 1.5400 area being the target of interest.
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