By: William Doody
The U.S. Dollar suffered sharp losses against the Euro on the first trading day of the third quarter. Reacting negatively to job loss estimates from private-sector payroll firm ADP, the Dollar shed nearly 1% against the EU single currency. Tepid data on manufacturing and home sales did little to help the U.S. currency as fears grew that unemployment may have worsened in June. Meanwhile, equity markets shrugged off the disappointing reports and recorded healthy gains, leading to further weakness for the Dollar, which has behaved inversely to stock and commodity markets in recent weeks. Further anti-Dollar comments from Chinese ministers seeking to have the topic of alternate reserve currencies addressed at the upcoming G-8 summit only added to the Dollar’s decline.
Looking ahead, Thursday is certain to be a volatile day in currency trading. Both the Dollar and the Euro will be subject to wild swings with market-moving events on both sides of the Atlantic. In the U.S., the Department of Labor will release the June unemployment and non-farm payroll data. A consensus view is that the economy will have shed some 325,000 jobs during the month, slightly better than the 345,000 lost during May. A worse-than-expected report could produce further declines for the Dollar, especially against the Euro. Meanwhile, the ECB holds its July policy meeting on Thursday, which will be followed by President Jean-Claude Trichet’s monthly press conference. Any suggestion of further monetary easing by the ECB would be negative for the Euro, while a statement indicating that the ECB will remain “on hold” would indicate further strength for the single currency.
Friday is a bank holiday in the United States, which may serve to increase volatility as traders take positions ahead of the long weekend.
EUR / USD Fundamental Analysis 1 July 2009
DailyForex.com