US Trading News – Dollar drops to a new three-year low after weak data, commodity prices fall

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The US Dollar dropped to a new three-year low against the Euro after weaker than expected US employment data showed that the US economy is not ready for an interest rate hike yet and the Fed will likely maintain its current loose monetary policy. Data released today indicated that the US services sector also slowed unexpectedly in April. This weighed down the dollar against a basket of currencies. So far the greenback has weakened by over 7 percent. If growth continues to slow down and the budget deficit isn’t reduced, then there will be more trouble for the dollar. EURUSD opened the US trading session at 1.4852 and rose by 86 pips to 1.4939 by 1400GMT, creating a fresh 17-month high. The Euro failed to push further allowing for a correction as traders started to close their long positions to take profits. Meanwhile, around the same time, commodities which had until then been falling, had made a turn-around, giving some boost to the Dollar, which has an inverse relationship with commodity prices. Equities also rose in the later part of the US session.

The Pound made gains against the Dollar earlier in the day despite weak data released during the European session. Cable continued to rise into the US session hitting a high of 1.6573 the dipped to as low as 1.6498. The pair opened the session at 1.6510. 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. On Thursday data on the British services sector are scheduled to be released. Market consensus expects the index to fall, which may reinforce the gloomy picture for the UK.

The Canadian dollar has been declining in the past two days reaching a two-week low against the U.S. dollar in the US trading session. The key driver was commodity prices which have slid significantly this week. Since the Loonie has a strong correlation to commodity prices, this has had a huge effect on the currency. At 1400GMT, the greenback rose against the Loonie with the USDCAD pair hitting a high of 0.9602, the highest since April 27. This was a gain of 65 pips from the US trading session opening level of 0.9537.

The Swiss franc hit another record high against the dollar in Wednesday’s US trading session. The Franc has generally been regarded as a safe haven asset especially in times of global uncertainty. The increase in demand makes the franc appreciate in value. The Swiss economy is famous for being stable and compared to the US, Switzerland’s economic conditions are far better. The USDCHF pair touched down to a record low of 0.8551 francs at 1400GMT but then weakened slightly as traders began to take profits. Some analysts expect Swiss National Bank is likely to tighten monetary policy this year, meaning there was further room for franc appreciation against the dollar.

Gold prices slid sharply for a third straight session. The main driver was silver which dragged down gold after the increase in margin requirements by COMEX, the commodities and futures exchange. Spot gold had hit a record high on Monday, reaching $1,575.78. The Spot price of gold opened the session at $1,532.83 then dropped down to a session low of $1,505.73. As the US Dollar falls, gold prices fall since gold prices are quoted in US Dollars.