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Will dollar continue to strengthen as europe decends into crisis?

By:   Finotec
  • 06-10-2008
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Last week saw turbulence in the financial markets as talks were held to approve a $700 billion bailout package for banks

Last week saw turbulence in the financial markets as talks were held to approve a $700 billion bailout package for banks. Both the senate on Tuesday, and the House of Representatives on Friday, voted to pass the bill, which was subsequently signed into law by President Bush. However the passing of the bill failed to promote gains on Wall Street. US stocks fell sharply as uncertainty remained as to whether to rescue package would be enough to support the economy.

Last week the dollar strengthened against a number of major currencies including sterling and the euro. The greenback was up as concern that the financial crisis was spreading to the euro zone took hold. The market was disappointed with the outcome of a European Credit Crisis Summit on Saturday attended by European heads of State including Britain, Germany and France. It failed to announce any plan similar to the U.S rescue package. ``It appears that European governments are failing to grasp the real problem and are taking reactive measures instead of dealing with the underlying situation,'' said a London-based currency strategist from BNP Paribas SA.” Traders will be taking note of key data releases this week to determine whether there will be more upside for the U.S currency.

This week on the economic calendar particular attention will be paid to the Bank of England interest rate decision. The expectation is that there will be a quarter point cut to 4.75% on Thursday. Although the rate shift is normally priced into the market, investors will be eyeing the monetary policy committee statement following it with interest. This statement is normally focused on the future and the market tends to move on speculation over future rate changes. In addition, data on manufacturing production in the UK is released this week. The forecast is that the data will show that the British economy is continuing to struggle.

Stateside, the U.S will be posting its trade balance figures at the end of the week. Analysts are predicting a narrowing of the balance but still far more goods are imported into the States than exported. On Thursday 9th October, the Group of Seven Finance Ministers and Central Bankers will be meeting in Washington DC to discuss global economic issues. Topics such as world currencies and exchange rates are usually discussed which can have an impact on the markets.

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Derivative and forex trading broker Finotec is a division of leading real-time Internet trading company Finotec Trading Inc, which pioneered the world of online forex trading in 1998. After launching our revolutionary forex online trading platform in 2001, we continued to improve our services and no



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