The US Dollar was off its three year low from Monday and rebounded in the US trading session. EURUSD was oversold after four weeks of continuous decline and today traders began to take their profits and closed their short positions. Many investors expect this rebound to be brief because of expectations that the US Fed will keep interest rates low and will not be tightening monetary policy soon. Almost halfway through the US session, the greenback started to gain against the euro. EURUSD started to drop from the session high of 1.4767 losing over 70 pips down to 1.4814. Additionally, the Dollar was given support by a weakening euro ahead of a statement by Portugal’s caretaker Prime Minster Jose Socrates. After release of the report, the Single Currency was extremely volatile after news that Portugal reached a bailout agreement with the EU and IMF.
The Pound weakened against most majors today after the release of manufacturing PMI data which showed the index fell to its lowest level since September 2010, and was well below the forecasted amount. This gave a signal to investors that interest rates in the UK will not likely rise anytime soon. Cable has been on the decline since first trading after the two consecutive bank holidays in the UK. After a small correction in the US session, the pair dipped some 90 pips from the session high of 1.6550 down to 1.6462.
The Canadian Dollar has slightly eased off its 3 ½ year high from last week. It has been trading in a range since Friday against its major counterpart the greenback, remaining between a high of 0.9540 and a low of 0.9457. In the US session, USDCAD hit a low of 0.9481.The pair has had a strong rally as the Loonie fights to gain against the greenback based on the Canadian elections, where the Conservative party won again. However some investors are cautious that the Conservative win may mean that the ruling party may focus more on fiscal restraint through spending cutbacks as opposed to a Bank of Canada interest rate hike. The latter policy would obviously be more bullish for the Canadian currency. Meanwhile, the Loonie traditionally has a strong correlation with commodity prices, especially with oil. During the US trading session, oil (Sweet Crude May futures) dropped from a session high of 112.84 down to 110.30.
The Swiss Franc managed to make gains against the US Dollar. The USDCHF pair dropped down to a new low of 0.8594 after opening at a high of 0.8672. The pair has been declining steadily for months. After a brief rebound by USD, the Swissy gained strength again. It is possible that the Swiss Franc was also boosted by its safe haven nature. After yesterday’s news of the death of Bin Laden, there are fears of retaliation by terrorist groups.
Gold prices were affected by the Dollar’s gain in the US session, as the precious commodity has an inverse relationship with the US currency. If the Dollar strengthens, gold prices fall, keeping in mind that gold prices are quoted in US Dollar. The Spot price of gold opened the session at USD1542.38 then dropped down to a session low of 1526.93.