US DOLLAR WEAKNESS DRIVES EURO, COMMODITIES
A plunging US dollar has been the talk of the currency markets as of late. On Thursday, the markets will receive a fresh batch of US economic data that could dictate the flow of the dollar for the rest of the week.
The US release schedule begins at 12:30 GMT with reports on initial jobless claims and revised first quarter gross domestic product (GDP). The world’s largest economy is projected to grow 1.2% annually, unchanged from the previous estimate.
The European session will also feature several market-moving events earlier in the day. At 06:00 GMT, GfK research group will release its monthly consumer confidence survey for Germany. One hour later, the Bank of England (BOE) will release data on consumer credit and net lending to individuals.
A deluge of Eurozone figures will also make headlines, including services sentiment, consumer confidence, industrial confidence and economic sentiment. About a half hour before the US data releases, Germany will unveil preliminary inflation data for the month of June.
The US dollar index has declined more than 1.5% this week and is currently trading at its lowest level since September. The dollar’s bearish reversal is stoking fresh demand for commodities priced in the US currency. Oil prices have rebounded sharply as a result, as traders continue to snatch up futures contracts at a discount.
After five weeks of declines, US crude prices finally broke above $45.00 a barrel. The market continued higher on Wednesday even after the US Energy Information Administration (EIA) reported a slight build in weekly crude inventories. Analysts had expected a sharp drop.
Energy traders should keep a close eye on US rig-count data, which will be released Friday.
The euro has been a prime benefactor of the dollar’s recent slump, as prices soared to fresh 11-month highs. At last glance, the EUR/USD was trading at 1.1407, having gained 0.3% for the day. Prices are expected to continue higher, although short term reversals are likely as the pair pushes further into overbought territory.
Cable’s bullish breakout intensified after Thursday’s open, as the GBP/USD rose 0.2% to 1.2956. The pair came within a few pips of the psychological 1.30 level. A continuation of the current breakout could lead to a re-test of the May swing high north of the 1.3030 range.
US crude futures are trading near two-week highs, a strong indicator that stability has returned to the market. The West Texas Intermediate (WTI) contract is eyeing multiple Fibonacci retracement levels going all the way back to the 23 May high. At the same time, momentum has clearly returned, which indicates that the bullish reversal is likely to continue for the rest of the week.