Dollar Icreases Losses

As the speculations emerge that the economy is growing the USD dropped Tuesday to its lowest level versus the EUR. The appeal for USD was reduced as investors decided to try trading with higher yielding assets that is why traders have sold the U.S. currency. For several months, the USD has a trend to move in the opposite direction as equities move as investors' willingness to buy riskier assets changes and depend on different factors. That trend showed signs of diminishing in August and resuming its more traditional correlation to economic data, as a result the USD index continues its contraction.

Looking ahead to today`s data capable to influence Forex rates, U.S. data will released later. The U.S. consumer price index (CPI) for August, Q2 current account data, August industrial production figures and September NAHB housing data will also be published.

Dollar Continues Strengthening

The US currency continues gaining versus its main counterparts. Yesterday it came close to its 2 week high against the Euro. It also rose against the Pound and Yen.

The reason of such appreciation is a better than expected Core Durable Goods Orders monthly report accompanied by China`s statements that it will keep on maintaining loose monetary policy. It seems that investors were impressed by the 1.1% rise in the Core Orders during June. The difference between the two reports is that the Core report measures the change in the total value of new purchases orders placed with manufacturers for durable goods, excluding transportation items. Orders for aircraft are known to be very volatile, and thus have the potential to distort the underlying trend.

Traders usually tend to pay more importance to the Core report as purchases orders placed with manufacturers for durable goods such as orders for aircraft are known to be very volatile. This report shows signs of positive growth, for the third straight month making investors believe that the global recession is coming to the end.

Among today`s news in economic calendar the main release from the U.S economy looks to be the weekly Unemployment Claims report at 12:30 GMT. Currently, while all the major economic indicators of the U.S economy are showing signs of recovery, it is only the job sector which goes on producing negative results.

Dollar Outlook Suffers from Concerns over U.S Monetary Policy

July 22, the US Dollar as well as other risk sensitive currencies dropped further against the Euro. However, unsteady equity markets brought risk aversion in forex trades. The Dollar trend is still bearish, as the EUR seems unable to perform a real jump. On Wednesday, the Dollar index was traded at 78.745, down from 78.920 on Tuesday

Pressure on the Dollar is put downwards, as strong performances from the stock markets goes on, as investors shift to riskier higher profiting assets. With rising uncertainty sentiment about the framework of the US monetary and fiscal policies, particularly in light of newly designed health care reform, the outlook on the Dollar looks very weak despite the Fed's and Treasury's guarantees.

Among toady`s important economic events are expected from the U.S, including the Unemployment Claims at 12:30 GMT and the Existing Home Sales at 14:00 GMT. These indicators are very important since they are leading indicators of economic state and are supposed to create great market volatility.

Very Bullish on Dollar, Cites World Supply

The dollar may strengthen against most major currencies as a U.S. “explosion of savings” reduces the world economy supply.
“We are very bullish on the U.S. dollar on most major cross rates in the short term, and even more so in the longer term,” as it was mentioned in the report of Carl B. Weinberg, chief economist in Valhalla, New York,. “A global dollar shortage will appear as the U.S. current-account deficit declines.”
The U.S. currency declined 0.5 % to $1.3867 per euro as of 7:22 a.m. London.
Get more detailed information about currency rate changes on the website.

Trichet Speech Announcement

On Monday, June 22nd at 8:00 AM EST, Jean Claude Trichet, European Central Bank Chief, is expected to talk about the current state of Europe economy recovery after the world financial crisis. At the Hotel Ritz in Madrid he will be speaking before a conference organized by the New Economy Forum and the Wall Street Journal.

The European currency is controlled by the ECB's Chief more than by any other single financial official. Thus his today`s speech may may effect the Euro position. As some market analysts expect, Trichet's speech will contain more positive words about the future of European economy and it may produce depressing influence on the Greenback. The EUR/USD remains at 1.4000 level.

Jean Claude Trichet is famous for his sentiment of inflation and broad hints that are closely analyzed being quickly acted upon by small and large participants in the currency markets.