The foreign exchange market started the week on a soft footing. The US Dollar traded on the backfoot against every major currency. Later on Monday, the EUR/USD currency pair continued to strengthen, topping 1.1660 as the overall currency movements echoed this mixed picture. Leading recent economic data out of China and a commodity price rollercoaster are behind much of today’s movements. Look for market sentiment to change drastically as a consequence.
The US Dollar has also been weak, treading under the 99.00 handle for the second week running.
US Economic Indicators
Currency over the groove
Currency has tumbled over recent economic indicators. Investor sentiment is also turning as they prepare for another Federal Reserve meeting later this month.
Currency Movements in Focus
EUR/USD mirrored that tenacity on Monday, lifting into the black and gaining acceptance above 1.1660. Such an increase comes on the heels of a week of rollercoaster movement, during which the common currency pushed higher in several sessions to wear down the greenback. Bank analysts noted a “strong correlation” between the EUR/USD and the major currency heat map’s U-turn. As seen in the chart above, this correlation is a strong positive sentiment for the Euro.
At the same time, the USD/JPY remained comfortably above the key 155.00 mark to start the week. This stability is an indicator that investors are tentatively optimistic about the Yen’s trajectory against the Dollar. The AUD/USD pair remained directional around the 0.6650 figure. This position represents a small net positive, an increase of just under 1.5% from last week. The Australian Dollar’s performance can be attributed to robust commodity prices and a stable outlook for Australia’s economy.
The GBP/USD pair stayed in a bullish consolidation below and above the level of 1.3300 throughout Monday´s European session. The British Pound was up around 0.75% on the week. “Stimulus measure,” said Jay M. The announcement is a notable boost for the currency amid still-evolving economic sentiment in the UK.
Gold Prices Show Mixed Trends
After a week of uncertainty, gold prices were able to hold their ground above the $4,200 level. On Monday morning, gold was trading a bit up, sitting near $4,210. Market analysts are looking to see if gold can hold these levels. They understand that gold often serves as a safe-haven asset during periods of currency turmoil.
Gold prices lacked strong upward momentum. The recent move higher indicates investors are going back to precious metals as a safe-haven investment. In particular, the ongoing increase in the US Dollar may further drive up demand for gold as a hedge against currency depreciation.
China’s Economic Data Impacts Market Sentiment
China’s recent economic figures November saw a 5.9% year on year increase in exports. Imports rose by 1.9%, which might reemerge in global markets in a big way. Further, China’s trade surplus increased sharply from CNY640.40 billion in October to CNY792.57 billion in November. This data is a sign for a stronger trade environment than earlier expected, which can help drive investor confidence.
These numbers have enormous consequences for all the currencies used in trade with China. They have the capacity to affect key trading pairs, like AUD/USD and USD/CNY. Traders constantly comb through these numbers. With an eye towards perceived shifts in global demand as well as economic prosperity, they would likely backtrack on their stances.