The U.S. Dollar is down substantially across the board as an International Monetary Fund Report encouraged traders to lighten up their recent long positions. Since late last week the U.S. Dollar has been gaining ground versus most major currencies as investors remained skeptical that the global economy was on track for a recovery. Traders have been questioning whether the recovery would be able to sustain itself without the influence of central bank stimulus.
Demand for the Dollar weakened on the news as traders felt more confident to seek higher yields in more risky assets.
U.S. equity markets are trading higher on increased demand for higher risk assets. Yesterday, equity markets sold off hard following the release of a weaker than expected U.S. consumer confidence report. This report helped to increase investor fear that the global economic recovery would not be as strong as previously estimated.
U.S. Treasury markets are trading slightly lower. Traders are lightening up on long positions on the thought that a faster than expected economic recovery would encourage the Fed to raise interest rates sooner than previously expected. The firm equity markets are also encouraging traders to limit positions in fixed income instruments to take advantage of the higher yields offered by higher risk assets.
The weaker Dollar is helping to send December Gold sharply higher. This move was expected because of technical factors. For the past three days, this gold contract has been unable to penetrate $985.00. The current chart formation suggested a move to $1005 to $1010 was likely.
Stronger demand for higher risk assets and a drop in the Dollar has helped December Crude Oil recover overnight following recent weakness. Gains could be limited if today’s oil once again shows a rise in inventory and a drop in demand.
