USD Weakens As Counterintuitive Sentiment Drives The Currency Markets

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USD Weakens As Counterintuitive Sentiment Drives The Currency Markets

The U.S. Dollar (USD) is down across the board against all of its major counterparts, despite fundamental data suggesting a positive outlook for the U.S. economy.

The EURUSD is up 0.22%, currently trading at 1.3935. The rise comes on traders’ expectations that the European Central Bank (ECB) will maintain its monetary policy stance and refrain from any further easing. Expect some volatility at the European business close as ECB President Mario Draghi delivers his speech and confirms, or invalidates, this bias.

Similarly, the Sterling (GBP) is also up against the USD, with the GBPUSD logging 0.38% gains on Thursday. The biggest gain comes from AUDUSD, with the pair currently up more than 1% at 0.9089. The AUD strength seems counterintuitive, with China releasing disappointing capex, industrial production and retail sales data and the U.S. reporting better than expected employment and retail sales data. However, Thursday’s action in the pair likely comes as USD weakness in the EURUSD filters through to currency’s other major crosses.**relatedarticle**

Elsewhere, the USDCAD is also down, currently trading at weekly lows of 1.1062, a 0.21% discount on the day’s open. Similarly, the Swiss Franc (CHF) has found strength against the USD, with the USDCHF trading at 0.8719, a decline of 0.24% on Thursday’s open.

A couple of key fundamentals will likely dictate the relative strength of the majors heading into the weekly close. The first is the ongoing situation in Ukraine, with the referendum as to the future of Crimea scheduled for Sunday. Traders and investors will be aware that either outcome could spark renewed geopolitical tension, and as such, will likely take a risk-off approach into the weekend. The second is the rising perception that China is experiencing an economic slowdown. As disappointing data continues to flow out of the Asian superpower, traders and investors will again likely lean towards a risk-off approach before Friday’s close. Whether this will help the U.S. dollar recoup Thursday’s losses remains to be seen.

To contact the reporter of this story: Samuel Rae at samuel@forexminute.com