Fears over the recent rising geopolitical tensions and coalition strikes on Syria eased on Monday and this forced the US Dollar generally lower against most of its rivals with the Euro and Pound being stand out performers. There appears to be little or no retaliation from Russia and its alias and thus it was business as usual for financial markets. Traders are pricing in their expectation the Bank of England will raise its official cash rate in May and the European Central Bank will quit its current stimulus program later this year and begin to lift interest rates in 2019. This will continue to put upward pressure on the Pound and Euro and any pullbacks on either currency should be considered buying opportunities once the momentum moves higher again. The rally on the AUD v USD and NZD v USD on Monday should not be attributed to strength in the two down under currencies, rather a lack of support for the US Dollar.
Positive Retails Sales data in the US failed to fire the greenback higher and with a positive mood amongst stock market traders there was a shift of money out of US Dollars and safe haven assets and back into global stocks, the Euro and Pound. CNBC this morning is reporting that net short contracts on the US Dollar touched their highest level since August 2011. What does this mean? It simply means a larger number of traders have been betting the US Dollar will go lower. It is an historical number and whilst it will be welcomed news for those traders short the US Dollar it should not be viewed as a trigger point to short it now. If you haven’t been short the USD then you’ve likely missed the boat on this occasion. Plenty more trading opportunities will present in coming weeks and months.
Today’s economic calendar shows a busy day ahead with the RBA’s April Minutes to be released and China’s 1st Quarter GDP figures are due. The European session will see UK Average Weekly Earnings and Unemployment figures released. An important German and Euro Zone economic sentiment survey is also slated for release at 7.00pm AEST. The US trading session is relatively data free with only Industrial Production and Building Permits data on the calendar and neither will likely grab headlines.
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