10.25.11

USD falls while CAD grows on Trading Sentiment

The end of the Group of Twenty summit has had a powerful impact upon the trading sentiment, causing the evolution of some currencies to change. This G-20 summit was supposed to find solutions for the sovereign debt crisis in the Eurozone and for the banks in the region. Up to now, the only result we know concerning this summit is that the members of the 20 European countries have refused the idea of a forceful restructuring of the Greek debt. It seems that the plans made by politicians did not manage to persuade investors of this thought. Moreover, the market has been affected by the decrease of the European manufacturing and services industries.

The result of this still blur outcome is that of influencing the trading sentiment, causing the risk appetite to grow once more. This has had a negative impact upon the US Dollar, which started to fall against its major counterparts as the safety need waned away. At the moment, the US Dollar continues to trade near the opening level against most of its major counterparts. The Group of Twenty decided, during this summit, not to accept the proposition of turning the independent European Central Bank for borrowing, but that it is the European Financial Stability Facility which should have the power of purchasing the bonds of the countries which have debt problems. Jose Barroso, the President of the European Commission, stated the following: “We have discussed options for increasing the firepower of the EFSF. I’m sure that progress can be confirmed on Wednesday.” At the moment, we can say that the work on devising the plans in order to solve the issues with which the European Union is confronted at the moment is only half done and it is very difficult, if not impossible for us to forecast what is going to happen in the near future and how is the European debt crisis going to find its way up to the end. As a result of this, most of the currency pairs on the market are now trading rather flat after the first wave of optimism which has been caused by the end of the Group of Twenty summit.

Based on these facts, the US Dollar traded rather badly today, not managing to score gains against neither of its major counterparts. The GBP/USD pair traded at the value of 1.5949, after initially growing from 1.5930 to 1.5999. The USD/JPY pair decreased from 76.19 to 76.09, after previously reaching the value of 76.47.

This change of the trading sentiment has been benefic for the Canadian Dollar, which gained today against most of its major counterparts. This is due to the increase of the risk appetite, which has caused traders to turn towards riskier assets, such as commodities, stocks and high-yielding currencies. This is a rather unexpected growth as the fundamentals are negative. Inflation in Canada increased and there are lots of speculations regarding the Bank of Canada’s decision concerning the interest rates. But the oil price continues to grow, almost reaching the value of $90 per barrel, which is a great support for the currency. It is thus likely for the Canadian Dollar to continue to grow in the near future, especially against the US Dollar.

Based on these facts, the CAD grew today. The USD/CAD pair decreased from 1.0096 to 1.0026. The GBP/CAD pair fell from 1.6090 to 1.6027. The EUR/CAD pair increased from 1.3957 to 1.3972.

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