Dollar Rocketed To Its Highest In June - 16.6.2011
US Dollar
Asian stocks dived broadly on Thursday, with all major indices loosing about 1% or even more, following sharp declines in US stock markets yesterday. Investors are seeking safe assets on concerns over a possible Greek default and weak economic data from the US. The fears about Greece debt problems spured demand for safe-heaven US Treasuries in bond markets and for the US dollar in foreign exchange markets. The yield of 10-year bonds fell below 3% yesterday, while the Dollar index advanced to its highest in June 75.8. As for macroeconomic data, yesterday reports showed consumer-price index in the US rose by 0.2% in May, somewhat more than economists expected, accelerating to a 3.6% annual pace. Today we will also see figures from Labor Department on initial and continuing jobless claims, which are expected to fall from its previous levels, but still remaining too high. Another important data will be released on US housing market, including building permits and housing starts, which are considered to be a representative indicator of recovery in construction.
Euro
The euro fell against the dollar to its lowest level in June – 1.4090 – and lost yesterday about 300 points against the greenback after Greek prime minister Papandreou said he would reshuffle his Cabinet. Papandreou is expected to form a new government and call a vote of confidence in Parliament as he seeks to pressure opposition lawmakers to back an austerity plan aimed at securing a new bailout. “Our duty is to the nation, not to political parties,” the prime minister said. Yesterday thousands of people rallied against austerity measures such as wage reductions and tax increases while lawmakers debated the budget cuts and asset sales which are required to receive financial aid. Meanwhile European authorities are still far from agreement on the second bailout. German Chancellor Merkel and French President Sarkozy will meet on June 17 to discuss the existend disagreement. The European Central Bank, supported by France seeks to avoid any default-related measures, while Germany insists on private investor’s participation in rescue plan. The Greece’s debt rose to 143% of its GDP in 2010 and the country lost any opportunity to borrow on the market as yields of its 10-year bonds rocketed to almost 18%, while 2-year papers are at almost 27%. Pair EUR/USD fell today from 1.4202 and touched 1.4090 in Asian trading hours.
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