USD – A Cautious Parade To Safety

This week has thus far produced cautious moves within the currencies as the USD has basically stagnated against the majors as investors have proven a nervous bunch. Data from the United States continues to backpedal and show that not all is well for the economy. Investors have taken the equity markets lower and left Wall Street on rather uneven footing. Yesterday’s weekly Unemployment Claims were only slightly better than expected and President Obama will not be able to point to them as a sign of an improvement. The Federal Reserve’s Monetary Policy Statement on Wednesday proved less optimistic than was anticipated by most investors too. While investors have been mumbling that there are negatives signs throughout the landscape, perhaps it took them by surprise to see the U.S. government essentially provide a disappointing sounding board too. Traders cannot be faulted for believing that the dark shadows that have prevailed over the markets for nearly two months now could be turning into another storm.

Today the U.S. will release its Final GDP numbers and a 3.0% gain is expected. However, the GDP figures have been less than rosy the past couple of months and if this set of details proves less than inspiring it could set off another sell off for Wall Street before going into the weekend. What does this mean for the USD? It is a good question,n but a complex one. The USD has been in a persistent and strong trend versus the EUR and GBP since December 2009, but the gains it made against the EUR the past two months were even quicker, meaning that some may continue to be wagering that the EUR lost too much value too fast. However, it can also be added that the USD is in a position that the Federal Reserve feels comfortable with and would not like to see the Greenback improve too much more in order to keep its ‘moderately weak USD’ policy in place. Adding to that mix nevertheless, is the fact that the EUR may have too many cracks to sustain these levels and eventually will have to lose more value to the USD until structural problems can be properly fixed and viewed by all. The USD has maintained a status as a safe haven among investors and in nervous markets it is likely to keep that banner.

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