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Forex outlook:
The dollar edged higher on Thursday as an unexpected gain in U.S. services sector activity eased concerns that the Federal Reserve may have to cut interest rates later this year to shore up a slowing economy. The greenback erased early losses against the Euro after the Institute for Supply Management's non-manufacturing index rose in June to its highest in a year, beating forecasts of a modest decline.
Another report, the ADP Employer Services, also showed a higher gain in private sector jobs, boosting expectations the Labor Department's monthly reading on payrolls, due on Friday, may also be stronger than expected, analysts said. "After the strong reading on ISM and a strong ADP jobs report, the market is optimistic about tomorrow's jobs data, which is all very supportive to the dollar," said Andrew Busch, global foreign exchange strategist at BMO Capital Markets in Chicago.
The dollar slumped against sterling after the Bank of England raised interest rates, as expected, to 5.75 percent and said inflation risks remained to the upside. The dollar hit a 26-year low versus the pound on Wednesday.
The European Central Bank kept rates on hold at 4 percent but suggested it would raise borrowing costs again in coming months to fight inflation. The dollar is losing its allure to yield-hungry investors as rates rise overseas. Many traders remain bearish on the dollar, but with sterling already at 26-year highs and the euro also just short of record peaks against the dollar, some were locking in short-term gains.
"Sterling and the euro have both had a pretty good run, and what we're seeing is that with the Bank of England and ECB out of the way, people are taking some profits," said John McCarthy, director of foreign exchange trading at ING Capital Markets in New York. "The medium-term trend, though, is unchanged."
The dollar was traded around the levels of 1.3600 against the Euro ,122.90 vs. the Yen and 2.0120 against the Sterling on 07:15 (GMT)
Crude Oil: After receiving higher than expected Crude oil & gasoline inventories the price of the black gold dropped to 70.800 but picked back immediately to above 71.0$ a barrel. The continuing tension in Nigeria caused by militia forces and an unexpected close of refinery in the U.S left the trend for the crude oil bullish. ``This market is incredibly strong,'' said Steve Bellino, senior vice president of energy risk management at Fimat USA Inc. in New York. ``Crude-oil inventories are close to a record and prices keep rising. This just shows that political worries outweigh the supply picture.'' A future contract for August was traded around the levels of 71.850$ a barrel on 06:45 (GMT)
Gold: Gold fell as the Euro weakened against the dollar, reducing the appeal of precious metals as alternative investments. `The strength in the dollar has definitely weakened gold's prospects,'' said Carlos Perez-Santalla, gold trader and president of Hudson River Futures in New York. Gold futures for August delivery fell $4.80, or 0.7 percent, to $650.60 an ounce on the Comex division of the New York Mercantile Exchange. ``Gold is an absolute follower of the dollar,'' said Frank McGhee, head trader at Integrated Brokerage Services LLC in Chicago. Gold may rebound should the euro rally, said Dennis Gartman, economist and editor of Suffolk, Virginia-based the Gartman Letter. Five of the past bear markets in the dollar resulted in a higher price for gold. ``Since the spring of this year, when gold failed on another attempt to push through $700, it has been on the defensive and correcting,'' Gartman said in a report. ``If the Euro pushed upward through $1.37, gold shall end its correction.''
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