US Dollar Lifts Despite Sluggish GDP Data, Euro Slides On Draghi’s Comments - 27.6.2013

US dollar has been in general stronger in the recent trading, mostly against the Euro and the Sterling, while against the Aussie and the Canadian was in a weaker position. The US dollar index reacted in an unusual way, it climbed higher at 82.99, after the quarterly GDP growth figure was surprisingly and significantly below expectations. The most obvious reason for that was that investors’ concerns about QE withdrawal reduced after the sluggish GDP data, lifting risk appetite. The S&P 500 rose by 0.96% back above the 1,600 also Dow Jones Industrial Average advanced by 1.02% to close at 14,910.14.

The Euro was under selling pressure following ECB President Mario Draghi comments that “The ECB has done as much as it can to stabilize markets and support the economy” sounding mostly dovish. Taking into account that inflation has been declining in the previous months for EZ with May inflation at 1.4% and core Inflation at 1.18% investors could anticipate for further steps to return to recovery, since latest GDP growth was negative in EZ. Thus dovish tone of the ECB President weighed on the EURUSD that inched downward as low as 1.2984 yesterday. The down trend is likely to continue, though 1.30 have proven before its strength either as a support or resistance level. Traders are focusing today on UK GDP data and US Jobless Claims which are likely to influence their currencies.

At the same time, the precious metal has been extensively losing ground against the US dollar as it loses its role of an inflation hedge due to Central Banks attitude towards limiting their aggressive monetary policies and inflation rates remaining at low levels. The XAUUSD dropped to August 2010 low at 1222.90 to rebound back to 1240 earlier today, the selling pressure has paused for the time being as Daily and Weekly indicators are extreme down into oversold zone, however negative structure appears strong.