USD Continues to Gain on Return to Risk Aversion
The USD continued to advance Tuesday against major currencies as a measure of U.S. consumer confidence registered an unexpected decline for October. Gold futures extended losses from the previous session as the USD rose. December Gold fell $7.40, to settle at $1,035.40 an ounce on the Comex division of the New York Mercantile Exchange and is currently trading around $1041.
Economic News
USD - USD Gains on Weak Consumer Confidence
The USD gained against the EUR for the second session in a row on Tuesday, after the release of unexpectedly weak U.S. confidence data intensified risk aversion with investors. Further concerns arose about the possibility the Federal Reserve will signal an eventual end to its stimulus policy stance at its FOMC meeting next week. The dollar index rose to 76.233, up from 76.100 late Monday, recovering from losses seen during Tuesday's earlier session.
The Conference Board's index of consumer confidence declined to 47.7 from a revised reading of 53.4 last month. This weakness mirrors the continuous rise in unemployment levels and undermines stabilization in other areas of the economy such as stabilization in financial markets and home prices.
Looking ahead for today, the release of the Core Durable Goods Orders at 12:30 GMT and New Home Sales at 14:00 GMT will likely cause volatility for the USD pairs. Further disappointing data may push the EUR/USD pair even lower.
EUR - EUR Down ahead of the Release of Key German Data
The EUR hit a session low at $1.4769 Tuesday afternoon, its lowest level since Oct. 13. Late Tuesday, the EUR was at $1.4802, down from $1.4865 late Monday and off a 14-month high of $1.5064 seen at the start of Monday's session. The EUR was at ¥135.88, down from ¥137.08. The U.K. pound was at $1.6389, up from $1.6324.
Along with the disappointing U.S consumer confidence report, the EUR was down on an expectation the German jobless rate probably rose to 8.3% in October from 8.2% in the previous month before tomorrow's report. Furthermore, according to analysts, the six month rally in stocks and commodities is probably at its peak as U.S. growth continues to lag, further hurting the appeal of riskier assets such as the EUR.
Looking ahead to today, investors should follow the release of the German CPI report which is forecasted to show consumer prices worsened, putting further pressure on the EUR
JPY - Yen Gains on Return to Risk Aversion
The JPY gained against major counterparts on speculation the global economic recovery will slow, reducing demand for high yielding assets. The Yen rose to 135.55 per EUR in today's early trading, from 135.89 yesterday, after earlier reaching 135.43, the highest level since Oct. 21.
