Unremarkable times call for unremarkable market moves, and for the most part, last week remained as unremarkable as I had expected. The dollar remained basically subdued for the first part of the week, but by the second half finally saw the dollar rally against the European currencies as I had suggested. In fact, the bounced was perfectly timed and from the sort of support levels anticipated.
I really can’t pinpoint quite what sparked the improvement precisely, but that’s quite a normal event at market turns. The market slowly comes to a consensus on why, a little while after the event.
In general, the week had been seeing the same theme in economic releases – improvement in industrial output and with confidence slowly beginning to return. Consumers spending a touch more and global industrial output numbers beginning to edge back into positive territory.
For Japan, the Tankan report, which measures the confidence among manufacturing companies, showed signs of modest improvement, but not really enough to generate a rush of confidence. Retail sales remained soft while unemployment rose further to 5.2 percent.
And this seems to be the trend that should stick for some while. In my world of looking at how foreign exchange prices should move the risk now appears for the dollar to be quite strong – more so against the European currencies where I feel there is a risk of a 7 percent appreciation over this month.
This positive performance has not been matched against the yen and there does seem risk of a slow decline in the dollar over the early part of the week to the recent low at 93.84. However, at this point, I don’t foresee this being broken by any substantial amount. Indeed, following this the risk does look more dollar positive for a recovery in the near term to between 95 & 96 in the short term but over the month I wouldn’t be too surprised to see a return back above 98.00 again.
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