U.S. Prelim UoM Consumer Sentiment to Lead USD Trading Today

The publication of the U.S. Prelim UoM Consumer Sentiment report at 13:55 GMT is set to lead USD trading today. This release measures the level of a composite index based on surveyed consumers. The figure is expected to be 67.2, up from last month’s 65.7. The other important events that are set to drive the forex market today are GBP PPI Input at 8:30 GMT, the U.S. Import Prices at 12:30 GMT and U.S. treasury Secretary Timothy Geithner’s speech at 20:45 GMT. Therefore, if you traders want to make big money now, you should open big positions in the majors now.

USD – Dollar Declines as Equity Market Rallies

The U.S Dollar fell against most of its major currency pairs yesterday, hitting its lowest level in nearly a year against the EUR, as gains in stocks and commodities prompted investors to wade into riskier currency trades. By yesterday’s close, the USD fell against the EUR, pushing the oft-traded currency pair to 1.4603. The Dollar experienced similar behavior against the GBP and closed at 1.66.99.

The Dollar has fallen every day this week against the EUR and Japanese Yen, and it marked its third straight daily decline against the Pound Sterling yesterday. Analysts attributed the fall in the Dollar, which has been treated as a lower risk, safe-haven investment, to growing optimism that the worst of the financial crisis has passed. This has caused investors to buy commodity-linked and higher-yielding currencies, which rallied earlier this week.

A leading indicator released yesterday was U.S. Unemployment Claims. This number handedly beat last week’s result. However, it failed to provide strength to the Dollar as investors may be waiting for key data due to be released today to implement their trading strategies.

Looking ahead to today, the most important economic indicator scheduled to be released from the U.S. is the Import Prices at 12:30 GMT. Traders will be paying close attention to today’s announcement as a stronger than expected result may boost the USD in the short-term. Traders are also advised to follow Treasury Secretary Timothy Geithner’s speech at around 20:45 GMT. This speech is very likely to impact USD volatility. Traders are advised to watch closely, as this is likely to set the pace of the Dollar going into next week’s trading.

EUR – EUR/USD Hits One Year High

The EUR rose to session highs against the Dollar yesterday as U.S. stocks extended gains and commodity prices firmed. The 16 nation currency hit 1.4612 against the Dollar, a fresh 2009 high. The EUR was broadly unchanged versus the CHF yesterday, and closed its trading session at around the 1.5140 level.

The EUR was affected by the global stock market rally and the bearish Dollar. The U.S. stock market rally led investors to buy-back into the EUR, as they looked for returns on buying commodity-linked and higher-yielding currencies in Thursday’s trading.

The Pound Sterling was actually the biggest mover amongst the majors, propelled higher by optimism about the UK economy and financial sector, and helped by a general move into riskier assets. Britain left Interest Rates at a record low of 0.50%, as it tries to get credit flowing again to strengthen an economy that may return to growth this quarter. Some reports show the outlook is brightening for Britain as Manufacturing Production rose 0.9pc in July in comparison to June. This was the biggest increase since January 2008.

Looking ahead to today, the most important economic indicator scheduled to be released from Britain is the PPI Input at 8:30 GMT. Analysts are forecasting this figure to increase from its previous reading. Traders will be paying close attention to today’s announcement as a better than expected result may continue to boost the GBP in the short-term.

JPY – Yen Makes Big Gains on the Dollar

The Japanese Yen strengthened against most of its major counterparts on Thursday, continuing to prove that for the time being that this is the solid currency that traders can rely on to provide them with steady profits. The Yen extended gains versus the Dollar on Thursday, to trade at about 91.40 amid a broad sell-off in the USD. The JPY also saw bullishness against the EUR and closed at 133.60.

Investors worry over a recent rise in the JPY as it makes Japanese products less competitive abroad and hurts the value of overseas sales when translated back into the Japanese currency. With steady gains primarily against the Dollar, much of the Yen’s bullish movement could be contributed to the repatriation of overseas earnings by Japanese companies into the local economy. This has had a positive effect on major JPY currency pairings, as the rising turmoil in the market is leading to more investment in the Japanese currency.

Crude Oil – Oil Prices Rise as Inventories Fall

Oil prices extended a four-day rally to near $72.30 a barrel on Thursday after a U.S. report showed a surprise decline in Crude Oil inventories, and OPEC said it would maintain official output curbs. Crude Oil rose 31 cents to settle at $72.24 a barrel, topping off a 6% climb since last Thursday.

Expectations that consumers may once again want more Oil when the recession bottoms have partly fueled the rally, with traders watching the stock market for economic telltales. There is a reasonable possibility that Oil prices will continue to be bullish going into next week, providing that the economic situation of the leading economies continues to rapidly improve.

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