U.S. dollar and Canadian dollar Update June 5/08
Forexmentor.com Forex Trading Price Action
It’s a good guess that interest rates are on hold in the U.S., based on recent remarks from Mr. Bernanke. But, what comes as a complete surprise is his reference to the U.S. dollar and its relationship to inflation. One could reasonably conclude that he is dollar-positive these days, and is in a mood to support it. Could this signal the end of the dollar’s swoon? Other markets seem to think so.
The euro dropped to a three-week low against the dollar, the loonie slid, gold dropped, and oil fell. It’s interesting that the G7 are girding to fight inflation by raising rates – just as soon as the current financial crisis dissipates. Not so in Canada, as it is widely held that the BoC will cut rates further next week – just at a time when other central banks are turning hawkish.
Not so good for the loonie, which is already suffering from the economic woes in Canada and the possibility of the Fed going in the other direction with rates at some point. Of course, all bets would be off the table if the U.S. economy continues to stumble, payrolls see further red, and oil prices continue to grow to the sky.
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