The American dollar struggled today 4 February in its trading, falling to the lowest level in three weeks. The drop comes after fears arose over a slowdown in the US economy following the release of the Institute of Supply Management's monthly report yesterday 3 February 2014, which showed a massive fall in the levels of production. Analysts note that the dollar lost out to many of its rivals including the euro.
Analysts point to the fact that the ISM is a major indicator for the health of the market and can drive the direction of the market. With the major loss in the production levels, analysts believe that confidence by investors will likely dissipate rapidly until they see signs of a rebound towards growth. Moreover, as the manufacturing numbers have fallen, concerns over the future of the Federal Reserve's tapering of the stimulus have resurfaced as investors wonder whether the US economy will be able to stand on its own without the added support by the Fed to back it up.
Traders are advised to watch for further volatility in the US dollar in the coming days, especially in the lead up to the Non-Farm Payrolls and Unemployment Rate reports which are due out later this week.
WTI Drops on Signs of Increased Supply Levels
In yet another round of speculation regarding the amount of crude stockpiles in the United States, it was reported on 4 February 2014 that the West Texas Intermediate had fallen to a near one week low in trading.
Analysts remind readers how speculation over supply levels can lead to fluctuations in the crude market. As discussed in the past, the forces of supply and demand on the price of crude are highly visible in this industry, in particular when it comes to the US since it is the world's largest consumer of fuel. Adding further complications to the mix are concerns over the pace of US economic growth. With fewer jobs added in December 2014 and a manufacturing slowdown from the previous rate that had risen earlier in the year, some investors are concerned that there may be a decreased demand for crude as a source for energy.
Analysts note that the American Petroleum Institute is expected o release their report on supply levels today, which will likely add further fuel to the speculation and increase volatility in the market.
Traders are advised to watch for additional fluctuations in the coming days, especially following the release of the API's report today.
RBA Signals Consistent Interest Rates for Mid Term
As expected, the Reserve Bank of Australia maintained its current interest rates in an announcement yesterday 2 February 2014. Along with the release of the rate itself, RBA Governor Glenn Stevens made a number of statements pertaining to the future of Australian monetary policy for the coming months as the central bank attempts to balance growth. At the time of the rate decision, the Aussie was up against the greenback. In his remarks, Stevens stated that the RBA would likely keep their current rates steady for the next few months, which analysts believe will help to add stability to the Aussie in its trading. He went on to express his confidence in the growth of the economy, noting that home prices are rising as is consumer demand.
Analysts note that despite the progress made, and the relative positive status of the Australian economy, there remain a number of issues that are yet to be tackled. First is that of inflation which the central bank is attempting to fight back against. Compared with many other Western nations, Australia has one of the higher borrowing rates for cash. Second is that of unemployment. In recent months, the economy has been relatively unsuccessful at adding more people to the workforce. That said, the fact that as noted above with strong consumer demand and rising housing prices which are generally considered to be indicators of strong growth, it would not appear that these concerns over inflation and employment are having a significant impact on the overall economy.
Analysts expect the Aussie to continue to do well in the coming days as investors are likely to feel more confident following Steven's remarks on the state of the economy and monetary policy.