The Dollar rebounds today after given a boost by crumbling commodity prices and risk aversion in equities (downside) and bonds (upside). Providing fodder for the Euro sell-off was ECB head Trichet’s dovish speech as he continued to see European monetary policy as “accommodative” and that a Greek restructuring is “not in the cards”. He also mentioned that the Eurozone recovery was “confirmed”. This gave signals to speculators that an interest rate hike is not in the picture anytime soon. The U.S. dollar rose more than 1 percent against a basket of currencies. EURUSD plummeted 390 pips since the European session high of 1.4898 down to 1.4509, knocking the Euro off its high levels, and off its17-month high reached yesterday. The pair found support at the 1.4525 and headed for a correction.
The Pound continued its downtrend wince the earlier session, after disappointing data for the UK services sector and after news that the Bank of England would not raise rates soon. The pound touched a six-month low versus a currency basket. Cable opened the US session at 1.6505 and dipped down over 150 pips to 1.6357. Most data that has been released recently from the UK do not paint a good picture for the UK economy and things could get tough for the Sterling. Earlier in the day the Sterling hit a fresh 13-month low against the Euro, since markets are not expecting a BoE rate hike until November or December, while many investors see the likelihood of another ECB rate rise in summer.
The Canadian dollar has been declining in the past week reaching a two-week low against the U.S. dollar in the US trading session. The key driver was the release of some disappointing data from Canada. The Ivey Purchasing Managers index dropped lower than expected in April and was down from March, indicating that the economy hasn’t been expanding since March. Additionally, commodity prices which have slid significantly this week, fell even further today. Oil especially, plummeted below USD100 a barrel in heavy volume trading in the late US session, marking the biggest drop since the 2008 financial crisis. U.S. crude tumbled to $98.39. Earlier in the day, oil was at $109.35, so this was a drop of over 100 pips. This was the first time crude recorded values below $100 a barrel since March 19. Since the Loonie has a strong correlation to commodity prices, this has had a huge effect on the currency. The USDCAD pair has been skyrocketing since the earlier session rising to as high as 0.9706 by 1700GMT, the highest since April 27. This was a gain of 120 pips from the US trading session opening level of 0.9579.
The Swiss franc eased off its record highs of yesterday. The Franc made losses against the US Dollar in the US trading session. The dollar made 1 percent gains against the Swissy to reach a session peak of 0.8712 amid broad dollar strength after the European Central Bank left investors without a sure sense of the timing of future interest rate increases. This contributed to a growing sense of risk aversion in markets. USDCHF opened the US session at 0.8583, thereby making almost a 130 pip gain.
Gold prices continued their precipitous fall for a fifth straight day. Investor liquidation prompted gold to slide around 2 percent to $1,462.23 an ounce, its lowest since April 18. Silver which is the main driver dragged down gold after the increase in margin requirements by COMEX, the commodities and futures exchange. Silver plunged 7 percent on Thursday, heading for its biggest weekly loss since 1983 and dragging gold 2 percent lower, as panic selling accelerated across the commodities sector. Spot gold had hit a record high on Monday, reaching $1,575.78 and has since declined. The Spot price of gold opened the session at $1,497.23 then dropped down to a session low of $1,505.73.