The Dollar continues to remain under extensive selling pressure as it is becoming increasingly apparent that the U.S economic recovery may be slowing down. Yesterday’s FOMC Minutes revealed that Fed officials had lowered their outlook for the economy for the first time since last April, projecting that GDP would expand by 3-3.5%, while stating that the risks to recovery have increased. Moreover, fuelling concerns that the U.S economic recovery may be stalling and adding to negative Dollar sentiments, retail sales showed a drop of 0.5% in June. According to the Commerce department, weak receipts at automotive dealers and gasoline stations pulled sales down for the second straight month following seven consecutive increases.
The Euro continues to hover around to a 2-month high of $1.2788, and has produced a solid support just under $1.2700, which if holds could lead to further gains. Up ahead, traders will want to watch today’s U.S Jobless Claims figure, which if better than expected could relieve some Dollar concerns and push the EUR/USD down. However, if results are better than expected and the EUR/USD successfully holds on to its recent gains it could signal a strong buying support for the pair.
The British Pound touched on a 10-week high versus the Dollar yesterday as stronger than expected UK employment data fueled speculation that the Bank of England may soon need to raise interest rates. Yesterday’s Claimant Count Change showed that the number of jobless benefits dropped to 20.8K, its lowest level in a year (versus an expected 20.1K and a prior reading of 31.1K). The Unemployment rate for the past three months slipped to 9.7% from 9.8% last month. Following the unemployment data the Sterling appreciated by 0.2% against the Dollar and traded at $1.5254.
Following this stronger than expected unemployment figures, it seemed as if the GBPUSD would pull off one of its trademark 100+ pip breakouts. However, while the Sterling appreciated by 0.2% to rise to $1.5254, it was unable to break the 1.5300 barrier. The pair has since become range bound between 1.5200 and 1.5300. Nevertheless, with current Dollar sentiments remaining negative, a move above 1.5300 seems more likely than a drop below 1.5200.
Written by Finexo.com