Binary Options News : September 16, 2013
US Dollar Suffers Heavy Falls On Summers Pullout
In what promises to be a busy and volatile week, trading began with the US dollar suffering heavy falls after former U.S. Treasury Secretary Larry Summers withdrew from the race to be the next Federal Reserve Chairman after Ben Bernanke. Summers, it is believed would tighten Federal policy more than his next main rival – Janet Yellen and his withdrawal sparked a sell off in the US Dollar as investors await a key FOMC meeting later this week in which some tapering of the Fed’s $85 billion a month asset purchasing program is expected to be announced.
Ben Bernanke’s term as Federal reserve chairman expires at the end of the year and at an important time for the US economy where a recovery is seen as very fragile. It is thought that Summers pulled out because he felt he wouldn’t have the US senate’s backing after a group of 20 senators sent a letter to President Obama endorsing Yellen following on from, 350 economists doing something similar.
With markets closed in Japan for a national holiday, it was a lower volume of trading in Asian stocks, however gains were seen almost across the board as the Summers withdrawal inspired a risk on sentiment which took traders minds of the FOMC meeting later this week. Hong Kong’s Hang Seng Index rose 1.09% but the Chinese Shanghai Composite fell 0.19% after economists stated that the Chinese stocks were due a correction soon. Australia’s S&P/ASX 200 increased 0.71% and New Zealand’s NZSE 50 added 0.80% with South Korea’s Kospi index adding 0.54%. US stocks last week finished having their best ever week since January.
The US Dollar was the main casualty in the markets risk on sentiment and the reaction to the Summers withdrawal as Asian investors moved into high yield assets and abandoned positions in the greenback. The risk on rally saw the AUD gain 0.99% on its American cousin, whilst the CAD gained 0.62%, the JPY gained 0.51%, the GBP gained 0.46% and the EUR gained 0.49% against the USD.
The weakened USD saw bargain hunters and bottom feeders snap up nicely priced positions in the commodity markets with gains of 1.25% seen in Gold and 0.74% seen in Silver. Crude Oil fell 0.96% as the likelihood of an American strike on Syria waned considerably and after slack US data released on Friday. Natural Gas rose 0.185 despite poor supply data last week as investors capitalized on the falling US Dollar.
In a busy day ahead, traders will be watching ECB President Draghi’s Speech early in European trading. This will then be followed by the eurozone releasing data on consumer inflation, which accounts for a majority of overall inflation. North American trading will see Canada release data on foreign securities purchases, whilst the U.S. is to publish the Empire state manufacturing index, as well as important data on industrial production and the capacity utilization rate.
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