USD Graphic Rewind 07.23
USD INDEX GRAPHIC REWIND
The dollar index lost ground yesterday after a relatively unexpected reversal in risk appetite took place early in Europe. If we cast our minds back late Wednesday Bernanke's comments had weighed on sentiment and riskier FX along with equities had been sold off as investors sought quality. This precedent looked like it would dominate trade Thursday as Asian equities traded lower over-night, however, early in Europe Germany, France and the Euro-zone released PMI data which came in much stronger than expected, followed closely by improving industrial orders and some solid retail sales data out of the UK which managed to spur buying in the euro and the aforementioned reversal. Going into the US session, more weak US data didnt manage to stem the flow of risk appetite except to ensure that the dollar was shunned as growth prospects in the US economy continue to worsen. US stocks rocketed higher and notched up the best day they have had in two weeks as the strong data in Europe and solid corporate earnings drove gains. As we can see the dollar did consolidate its losses around the 82.50 level, this largely was players unwilling to take new positions ahead of the release of the EMU bank stress-test results which is due later today.
Looking ahead, the closely watched stress-test results will keep trade range-bound today with players not wanting to get caught on the wrong side of any nasty surprises. The euro and other riskier currencies have been unable to push above their over-night highs signalling some caution entering the market ahead of this closely watched release.
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