Dollar Rally Continues

by | Sep 26, 2014

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Neil Davies, Head of Trading at PlutusFX, sees the dollar rally continuing.

The disparity between economic growth in the USA and the Eurozone continues to be highlighted in the currency pair, which when viewed in graphic form would be classed as a Black run if it were a ski slope.

I reported last week that EUR/USD had fallen to 1.2885, down from its May high of 1.399. The pair currently stands at 1.2715. Since then nothing has happened which is likely to shift it in the opposite direction.

On Tuesday the Markit PMI index indicated that business growth in the Eurozone had cooled, dropping to 52.3, down 0.2 from August. In France it was just 49.1 (a figure below 50 indicating contraction).

On Wednesday the IFO Business Climate Index for Germany fell for a fifth consecutive month, below analyst’s forecasts.

Even the US Treasury Secretary, speaking at the G20 meeting, has urged Eurozone countries to boost demand. It would appear that across the water there are serious concerns at the continued Dollar strength, with many commentators seeing US Interest rates rising first and before a ‘considerable time’ has elapsed. This led last night to a fall on Wall Street, with traders worried about the strong dollar affecting export demand.

To top it off, just released USA GDP figures show annualised growth at 4.6%.

Forget ski slope, more like cliff diving!

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