The Dollar rose against both the Euro and the Yen on Friday as better than expected data showed that consumer confidence rose in June to its highest level in more than two years. Moreover, Forex traders responded well to the U.S Fed Chairman Ben S. Bernanke’s statement that despite job growth, the U.S economy is growing and is not at risk for a double dip recession.
This week, is expected to be particularly quite for the U.S with only a few key events standing out. On Wednesday, the census bureau will release the Building Permits figure and on Thursday, forex traders are advised to watch the release of the Core CPI.
On a different note, despite historical low interest rates and billions of dollars of government stimulus, US inflation levels remain low. However, this situation is not expected to remain for an extended period of time, and runaway inflation fears continue.
The Euro extended last week’s rally, advancing against both the Dollar and the Yen in the early morning trading session. The single European currency rose briefly above the $1.22 mark to touch on a high of $1.2207 – its highest price since June 4th.
The Euro got some much needed support last week as it shook off early losses to move back above $ 1.2000. Lending a helping hand to the currency was a positive ECB meeting in which President Jean Trichet stated that the ECB would continue to lend money to banks to pump liquidity into the EU financial system and prevent further credit problems.
Up ahead, traders will want to watch Tuesday’s German ZEW figures. This survey of German institutional investors and analysts is highly regarded and typically has a strong impact on the Euro. Recently, the Bundesbank (the German banking regulator), has been criticized for being lax with its enforcement of German banks. Therefore, investors will want to watch and see whether the ZEW Business Sentiment numbers have been affected by the growing lack of faith in the Bundesbank.
Last week, the Bank of England held its benchmark interest rate steady and continued to withhold from widening its quantitative easing policy as newly elected Prime Minister David Cameron prepares the nation for the biggest budget cuts since the 1980’s.
As predicted the Monetary Policy Committee, by BOE governor Mervyn King, kept its bond purchasing program unchanged at £200 billion, while the central bank opted to hold the official interest rate at 0.5%.
Trading in the British currency could prove very volatile this week as the U.K prepares to release its CPI and Retail figures. Specifically tomorrow, CPI number could lead to some significant movement in the GBP/USD as Forex investors are beginning to believe that the current rise in inflation in not just temporary issue, and that it may extend into the long term.
Written by Finexo.com