Upcoming Bank of England and European Central Bank interest rate announcements remain the most highly-anticipated events of the week, with many traders choosing to stick to the sidelines ahead of the potentially market-moving releases. Combined with continued uncertainty surrounding the Dow Jones Industrial Average and other key risky assets, speculators are hesitant to open large positions ahead of key economic event risk. Further tumbles in US equity indices certainly bode poorly for general risk sentiment, and the US dollar may stand to benefit from a subsequent carry trade unwind.
Do you think the Carry Trade will rally through upcoming trade? Vote yes or no in our Currency Trading Forum Carry Trade Poll.
The Dow Jones Industrial average shed a 1.3 percent to 12,655 just half an hour of the New York session close—forcing a late Japanese Yen rally against higher-yielding counterparts. The key barometer for broader investor optimism now trades nearly 5 percent off of its yearly open, and the threat of further declines may keep a lid on substantive yen retrace through short-term trade.
Written by David Rodríguez, Currency Analyst for DailyFX.com, drodriguez@dailyfx.com
To discuss the US dollar and other major currencies with DailyFX analysts, be sure to visit the DailyFX.com Currency Trading Forum.
