Forex outlook:
The dollar fell against the Euro on Tuesday, dipping below important technical levels after Federal Reserve Chairman Ben Bernanke said the ailing U.S. housing sector may remain a drag on economic growth. The dollar is trades around the levels of 1.3520 against the Euro,around the levels of 121.40 against the Yen and around the levels of 1.9935 against the Sterling.
A report showing U.S. services sector growth hit its highest level in more than a year helped the dollar recover some losses by suggesting there's still too much juice in the economy to justify lower interest rates. But Bernanke's warning on housing and market expectations of higher interest rates in the euro zone and swifter growth in other major economies kept investors gravitating away from the greenback.
In remarks prepared for a conference in Cape Town, South Africa, Bernanke warned that housing market woes may drag on U.S. growth for "somewhat longer" than expected. “He could have been more upbeat given the recent run of strong U.S. data, but his acknowledgment that housing is likely to be a more protracted drag really caught the market's attention," said Sophia Drossos, senior currency strategist at Morgan Stanley in New York.
The European Central Bank is expected to lift interest rates to 4 percent today at a meeting 11:45 (GMT), and some are gearing up for officials to signal future increases as well. But Alan Ruskin, chief international strategist at RBS Greenwich Capital in Greenwich, Connecticut, said the Euro/dollar rate is "a sideshow to the story of risk appetite on the crosses, which is where money is being made and lost." The euro earlier traced out a new record high against the low-yielding yen at 164.62, Expectations for future rate hikes also boosted demand for the already high-yielding Australian (AUD) and New Zealand dollars (NZD), which respectively hit 17-year and 25-year highs against the U.S. currency.
Gold: Gold gave up gains in New York afternoon trade on Tuesday after hitting a fresh three-week high as continued gold selling by European central banks dampened buying. A decline in the dollar after comments by the U.S. Federal Reserve chairman on economic growth failed to generate interest in the metal, and analysts saw range-trading in the near term. “The market was long, probably on the back of a weakening dollar, expecting more of a reaction as we moved into the New York market. In fact, there has been some selling since the opening and longs have been squeezed out," said David Holmes, director of precious metals sales at Dresdner Kleinwort. Gold future contract is trades around the levels of 675.40$.
Crude Oil: U.S. crude oil futures fell on Tuesday in choppy trading as traders booked profits after two sessions of strong gains and with RBOB gasoline futures slumping and weighing on the complex. “The storm was definitely driving Brent," said Phil Flynn, analyst at Alaron Trading in Chicago. "These storms are so unusual in the Middle East that there's a lot of uncertainty as to how it's going to play out. As long as that uncertainty's there you're going to see the choppy market." A powerful cyclone skirted the coast of Oman on Tuesday, disrupting oil and gas exports though but the storm appeared to be weakening and moving north through a major shipping channel toward Iran. Crude Oil future contract is trades around the levels of 65.60$.
Pool position:
