April 12, 2011
With no hardcore data coming out, risk hungry investors took a break allowing the dollar to edge slightly higher versus its major counterparts. EUR/USD closed 26 pips to finish at 1.4428, while GBP/USD fell 29 pips to end at 1.6348.
The reason why the dollar gained yesterday is most likely due to some profit taking that took place. After all, higher yielding currencies had been straight up killin’ the past couple of weeks, so a break every now and then is expected.
For now, the dollar is still stuck in the loser’s corner, as it seems that some Fed officials are quite dovish on the state of the economy. FOMC Vice Chairwoman Yellen talked about commodity prices and said that the recent surge was not reason enough for the Fed to start raising rates. She pointed to high unemployment as a reason why the Fed should not be a in rush to exit quantitative easing measures.
Meanwhile, Fed Governor (and also FOMC voting member) Dudley also laid down the dovish smack down, saying that people shouldn’t get too excited about tightening measures and not to overreact to inflation.
Later today, we get our first red flag of the week in the form of trade balance data. It’ll be interesting to see how the recent weakness of the dollar and the rise of commodities have affected the U.S. economy. According to forecasts, the U.S. posted a trade deficit of 44 billion USD this past February. I wonder though – could the past winter’s harsh conditions have affected trade? Tune in at 12:30 pm GMT to find out!
"The only cable I watch is the pound baby."