Forex US Session Review – US Dollar weakens after weak GDP and jobs data

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The Euro was enjoying new week highs against the US Dollar for most of the day until early into the US session, boosted by optimistic news about Asian banks aiding in European debt by purchasing Portugal bail out bonds, and then boosted further by disappointing U.S. economic data which weakened the U.S. Dollar. However, two hours into the U.S. session EURUSD dipped from highs of 1.4205 down almost 140 pips to 1.4067. The President of Eurogroup of finance ministers had made some comments that sent waves of fear across the markets causing the Single Currency to plummet. Jean Claude Junker expressed concern that if the IMF does not disburse its portion of financing for Greek aid, it might not be possible for some European countries to take on that portion of aid.

GBPUSD recorded a new two-week high struck in the U.S. session at 1.6395, gaining 85 pips from the open of 1.6310. Sterling was given a head start against the Dollar which was weakened after weak U.S. GDP and jobs data today. Continued sovereign Asian buying of the Pound helped push it further up. Meanwhile, a Citi/YouGov survey done in the U.K. showed inflation expectations for the year rose in May compared to April. The focus is now on whether the Bank of England will raise interest rates soon. Outgoing BoE policy maker Andrew Sentence mentioned in his speech yesterday that the U.K. was ready for an immediate rate hike. The BoE will be closely watching PMI data to be released next week on June 2. The Pound also made gains against a weaker Euro in the U.S. trading. EURGBP dropped from highs of 0.8693 down to 0.8610.

The Swiss Franc pushed higher versus the weaker US Dollar, extending gains well into the U.S. session. USDCHF dropped from highs of 0.8710 down to lows of 0.8649 where it consolidated around that level until close of the session. Meanwhile a broadly weaker Euro in New York trading hours caused the EURCHF pair to plummet 145 pips from highs of 1.2346 to lows of 1.2200. The Swiss Franc is considered a safe haven currency and strengthens in times of crisis.

USDCAD has been range bound all week trading between highs of 0.9815 and lows of 0.9742. However overall the USDCAD pair has been on an uptrend since the beginning of May, rising from lows of 0.9444, the lowest levels since 2008. Recently the Loonie has been softening against the greenback, weighed down by ongoing concerns of the Eurozone debt crisis which has affected commodity prices. The Canadian currency is a commodity-linked currency and usually mirrors commodity prices, especially crude oil which declined in the U.S. session from highs of $101.52 down to $99.61. Meanwhile, there are low expectations the Bank of Canada will raise interest rates soon. Soft inflation data last week firmed this belief.

Gold began to ease off its three-week highs due to profit taking as some investors chose to unwind long positions. Spot gold prices declined since the open of the European session, dropping over $16 from highs of $1,530.83 to $1,514.53. Spot gold prices and the U.S. Dollar are said to be inversely correlated, however this is not always so, as sometimes there is a time lag between the two. Generally we should see a bigger time period. In the past week the Dollar was weaker against most majors.