It’s a new week. Not much on the Calendar for today, but we’ve got Retail sales in the US out on Tuesday. That is currently forecast to have improved, in keeping with the new optimistic mood that a lot of people seem to be in in the US. We’ve also got consumer numbers coming in later in the week, for both the US and Europe. It will be interesting to see if the current positive mood can be maintained.
In any case, close attention has to be paid to the figures and the effect they will have on the forex dollar pairs, more so than usual because the driver of dollar sentiment seems to be undergoing a change, just like it did earlier in the year. This change has to do with the state of the US economy.
Typically, if a country’s economy is doing well, then its currency should be in good shape too. If things are bad, then faith in the currency is rightfully challenged. In this crisis, the dollar has been doing great because of its status as a reserve currency. People also invest in US-based assets. At the end of the day, the US seems a safer place than the rest of the world…the lesser of two evils. Thus, the dollar did well, even when things were bad in the US. Also, when things started looking up, the Dollar would lose some steam, as people would take their money out to invest in other riskier (not sure that’s a word) currencies.
Well, last week the dollar gained in the Forex markets because people are starting to believe that the US economy has seen the worst of things. They think it might all be up from here. This means that the blanket effect of Up Equities-Down Dollar and vice versa might now be over. Each Dollar pair will rise and fall by its own merits to a greater extent than we’ve seen recently. This obviously complicates things a little, but that’s trading for you.
Things might turn around again shortly, so we all have to keep up.