Markets Benefit From Recovery

Last week’s good news from the US raised investor confidence and provided many with new forex opportunities. In the US the unemployment rate fell for the first time in fifteen months and fewer jobs were lost than expected. Emerging markets are starting to benefit from the recovery. Nick Chamie of RBC Capital stated, “Emerging markets are hopefully going to benefit from a global recovery that gains a bit more traction in the second half of this year.”

Recovery Dollar Positive

Stocks rallied across the globe and the US dollar reached a seven week high against other major currencies. The British pound was pressured downward by the news that the Bank of England intends to engage in more quantitative easing. The Japanese yen fell against most major currencies as Japanese investors sought higher yielding assets overseas. US Treasuries posted their weekly increase since 2003 making them more attractive in this week’s upcoming auction. Ulrich Leuchtmann of Commerzbank AG stated, “The recovery is setting in relatively quickly. It’s positive for the dollar in the long term because when the economy recovers it’ll be clear that the U.S. is coming out of the crisis better.”

Dollar Returning to Fundamentals

Many investors are returning to the view that good economic news should benefit the dollar rather than pressure it downward as it has in the recent past. The dollar index rose 0.8% last week to 78.975 reducing safe haven demand for the greenback. Many forex experts see the dollar returning to fundamentals. Stephen Gallo of Schneider Foreign Exchange remarked, “This is monumental, This would mark a sea change in how speculators trade economic data and the overall view of the U.S.”

Full Calendar This Week

The coming week promises a full economic calendar. On Tuesday the Federal Reserve begins a two day meeting, on Wednesday June’s international trade data is scheduled for release, and Friday will see the release of July consumer prices, industrial production and consumer sentiment.