The dollar is much stronger today after capping a bearish trading session on Friday. Traders ditched the greenback at the end of last week after there was the publication of positive economic data from the U.S. economy. This gave traders the confidence required to sell the haven dollar and buy into risker currencies.
All of this has been turned on its head today for a number of different reasons. The news of the resignation of Italian Prime Minister Mario Monti has sent shockwaves through the markets. In addition, the stock market slump on Wall Street during Friday’s trading session has deterred traders from taking risks today.
The AUD/USD pair is much lower this Monday by 0.29% at $1.0536. The USD/CAD is up by 0.09% at 98.66 Canadian cents. The USD/JPY pair has soared a whopping 0.5% to 83.95 yen.
There are signs that traders are getting a bit of confidence, but this is not clear enough yet. Whenever Asian shares rise, which has been the case this morning, the markets are known to go bullish later on in the trading day.
This may result in a weaker USD, but we will have to wait and see what happens.
The going budget talks in the U.S. is the main reason why the dollar is so strong today. This is not to discount the fact that the USD was oversold during Friday’s trading session. Therefore, to some extent, the greenback is making a bullish correction at the moment.
There will need to be some progress with regards to the U.S. budget in order to help push the dollar lower in the next few hours.