It was reported on 23 July 2013 that the US dollar had dropped to nearly its lowest numbers against the Euro in a month, continuing a two week fall for the American currency against its rivals including the Yen. Analysts have pointed to the unexpectedly poor housing market figures as the cause of the most recent hit to the USD.
It should be noted that the news of the weakened dollar comes as many economists have begun to speculate on whether the Federal Reserve may begin to slash their quantitative easing measures sooner than expected. Some have stated that they believe that Fed Chairman Ben Bernake may attempt to reduce Fed spending down to $65 billion in the next quarter from where it currently stands at $85 billion. Analysts believe that the poor showing by the housing numbers may influence Bernake’s decision on how to move forward on the cuts along with the rate of unemployment that he has often cited. Analysts point to a reduction in stimulus activity as an instrumental part of increasing investor confidence that should be taken into account.
Moreover, analysts believe that the future of policy decisions regarding the stimulus will likely add continued volatility to the market, making the USD more unpredictable in its trading pairings. Traders are advised to proceed with caution.
New Zealand to Announce Rate Decision
The Reserve Bank of New Zealand is set to release its decision on interest rates at a meeting at 21:00 UTC on 24 July 2013. Analysts are currently speculating that the current rate of 2.5% is likely to be maintained by the central bank.
Analysts remind readers of the importance of interest rates on currencies as they can significantly influence their value in trading.
Traders are advised to exercise moderate caution until after the interest rates are announced.
Speculations on Tax Cuts Helps Spur Strong Pound
Following statements by British Prime Minister David Cameron indicating that he is confident of signs that the UK economy is on the rebound, the GBP enjoyed its fifth straight day of against against the faltering USD. In his remarks, Cameron noted that the government may institute some tax cuts should the recovery continue, helping to increase investor confidence.
Analysts note that many experts believe that the British economy is on the rise and that growth is to be expected. That said, traders are reminded that the UK economy remains far from stable at this point, which may affect the GBP in market trading.