Dollar climbs against Euro overnight before Euro retracement

US Dollar:

Once again, we would have do take a more critical look at the US dollar to assess its performance Monday. An overdue correction from EURUSD seems to signal a robust performance from the individual cur-rency before retracing seeing the Euro gain its lost ground. It was the first advance for the greenback in this benchmark pair in six active trading sessions and given this particular pair’s weight in the Dollar Index, the com¬posite would similarly show a meaningful bounce for the dollar. Yet, when we measure the performance of the other majors Monday, we are left with a very different assessment. With most of the US capital markets and banks closed for the extended Martin Luther King Jr. holiday; there was a notable lack of participation State-side. For most of majors, congestion was the appropriate outcome considering there was relatively little pres¬sure to forge new trends or correct already overextended runs. However, for EURUSD, the situation was differ¬ent. Looking beyond liquidity, this particular pair found itself repelled by a technical ceiling and further manipu¬lated by meaningful fundamental activity from the Euro-region.
DATA : TIC Long-Term Purchases


Pound:

The British Pound advanced to a fresh monthly high of 1.5954 on Monday as home prices in the U.K. increased for the first time in three-months, and the rise in growth and inflation could push the exchange rate higher going forward as market participants speculate the Bank of England to start normalizing monetary policy later this year. However, Ernst & Young’s Item Club said that the BoE should “keep base rates where they are until it is clear that the economy is taking the fiscal adjustment in its stride,” and noted that the MPC should “hold its nerve” as price growth is likely to approach 4% by the spring of 2011. As the tough austerity measures bear down of the recovery, the BoE certainly faces an uphill battle given the stickiness in price growth, and the cen¬tral bank may turn increasingly hawkish over the coming months as policy makers expect inflation to remain elevated this year. In turn, the MPC may look to retain its wait and see approach as it aims to balance the risk for the region, but the GBP/USD may continue to pare the decline from back in November as interest rate ex¬pectations gathers pace.
DATA : CPI

Euro:

As European policy makers aim to restore investor confidence, the renewed vigour behind the EU could push exchange rate higher in the days ahead, but the group of policy makers may fall back to their lackadaisical approach as they struggle to meet on common ground. German Finance Minister Wolfgang Schaeuble argued that there is “no immediate need” for the EU to step up its efforts during an interview with the Deutschlandfunk radio, and noted that the bailout fund is large enough to handle “whatever is under discussion in the short term” as the region takes unprecedented steps to manage its public finances. As European policy makers struggle to restore investor confidence, the euro is likely to face additional headwinds over the near-term, and the EUR/ USD may continue to retrace the sharp rally from the previous week as market participants speculate Spain and Portugal to share Ireland’s ill fate.
DATA : German ZEW Economic Sentiment

General:

There are two levels of discussion when it comes to the Australian dollar. On the one hand, the cur-rency is still considered one of the most appealing currency’s out there with its 4.75 percent benchmark lending rate and high inflation outlook. Early Monday a TD Securities price gauge reading 3.8 percent would keep the pressure on. However, growth is becoming a more prominent concern in this equation with the flood.

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