Forex Investment and Currency Trading

FX Update
No economic data due out of the US today

Upcoming Data: Home sales, ABC consumer confidence

USD
The USD has turned stronger across the board this morning with the broad USD index, as measured by the DXY index, up 0.6% from the morning’s lows. The relatively strong results from several US corporates has generally eased concerns simultaneously increasing risk appetite and demand for USD.

EUR/USD
The EUR has plummeted lower this morning even after ECB governor council member Weber continues to issue hawkish comments. Bank members have noted that the inflationary environment remains unsettling. Though concerns about intervention in FX market have continued to circulate through the market  such a scenario is unlikely at best.  

GBP/USD
GBP has been one of the main beneficiaries of the improved risk environment. With the UK government and the Bank of England due to announce liquidity measures to support UK mortgage providers. Market sees scope for further GBP gains over the coming weeks. Fair value measures suggest that GBP has been significantly oversold relative to interest rate differentials.

USD/JPY 
JPY is trading significantly higher this morning as an improving sentiment towards risk persists in the market. Equity markets are higher across the board in Europe and Asia, and US equity markets look to open in solidly positive territory. Watch for USD/JPY to trade higher in the near term as the markets attitude towards risk assets continue to improve.

AUD/USD
While Risk appetite has increased this morning with stronger equities, USD has been the major beneficiary of the better than expected US corporate profits. The equity market is prepared for substantial strength this morning with Dow Jones futures up 129 points at the time of writing. A moderation in commodity prices is also pushing AUD/USD lower. Dollar strength should remain the theme through the day with no major data to cause a sudden shift. Look for a continually lower AUD/USD.

NZD/USD
NZD/USD dropped rather sharply this morning as the dollar gained substantial broad-based strength and commodity prices slowed. However, NZD/JPY and AUD/JPY are both trading higher this morning, a good indication of an increase in market risk appetite. With little data out today, NZD should continue to be driven lower by the US dollar’s strength.

USD/CAD
Canadian CPI printed at a tame 0.4% for March which could pave the way for the BoC to cut rates by as much as 50bp next week. This caused substantial CAD weakness through yesterday’s trading. While USD/CAD consolidated slightly overnight, the trend has reversed and USD/CAD has pushed higher on the back of a moderation in energy and metal prices. Falling home sales in Canada should continue to create CAD weakness.

Commodities Update
Oil reached a new high at $115.54/bbl yesterday, but with broad foreign currency consolidation against the dollar, oil prices have fallen. The correlation between broad USD and oil has been particularly high recently. Gold, too, has been highly correlated with the USD, and particularly EUR/USD (correlation of .76).