Daily Forex Overview

Previous session overview

On Wednesday, the dollar was lifted for a second day by falling oil prices and repeated talk about an eventual need for U.S. interest rate hikes to curtail inflation.

Factory orders in the euro zone dropped at their sharpest rate in five years in May, adding to other news Wednesday of slowing demand and rising prices.

The euro is steady, with oil a bit lower and gold slightly higher. Dollar strength is the primary reason why the Euro is trading close to a 2 week low; it is starting to become very hard for Euro traders to escape the reality that the Euro zone economy is deteriorating. EURUSD traded with a low of 1.5668 and a high of 1.5799 before closing the day at 1.5695.

Sterling recovered versus the dollar as minutes released from the Bank of England's most recent policy meeting, when rates were held at 5%, showed hawkishness from one policymaker. GBPUSD traded with a low of 1.9902 and a high of 2.0032 before closing the day at 1.9995.

The greenback reached a two week high against the yen of JPY107.97 due to better equity performance, with support also from reports of a Japanese insurer buying a US counterpart. USDJPY traded with a low of 107.17 and a high of 107.97 before closing the day around 107.90.

Higher domestic inflation numbers did not change market outlook for the Bank of Canada to leave interest rates at 3.00%, as the Canadian dollar steadied to the greenback on Wednesday.

The Australian dollar fell to a two week low in Asia Thursday after the Reserve Bank of New Zealand cut interest rates for the first time in five years, and signaled more will follow, dragging high yielding currencies lower. A trinity of weaker commodities, lower oil prices and a stronger U.S. dollar also weighed on the local unit, which dipped to an intraday low of USD0.9579, its lowest level since July 10.

Market expectation

ECB, forecasting that the region's annual inflation rate will rise higher than 4% this year, is unlikely to lower interest rates soon because rising producer prices are feeding inflation.

AUDUSD may have hit peak in its cycle with risk offshore investors may begin to unwind positions betting an RBA easing cycle is on the horizon.

Analysts expect that Euro Could Come Under Further Pressure on German IFO Report.

Markets will look ahead to Thursday's economic reports consisting of weekly jobless claims and existing home sales. Weekly jobless claims are estimated to increase to 375k, up from 366k a week earlier. Existing home sales are seen slipping to 4.93 million in June units versus 4.99 million units a month earlier.

Most important events of the day