US Dollar Strength will continue This Week

 Tuesday, 19 October 2010

It's Tuesday, so it's time for our weekly wrap up of what happened on the financial markets in the last 7 days. Last week saw some interesting shifts in currency behaviours - as well as some interesting changes on equities markets throughout the world. Let's take a look at what went on - in this week's currency and financial market report.

Equities were broadly higher last week - with the 5 trading days netting almost 1% on the FTSE and a serious 3.2% on the DAX. The CAC in France also gained - despite protests against pension plan cuts by the Prime Minister. The CAC gained 1.7% on the week to finish at 3827.0.

The Dow Jones in America finished up half a percent, but the Nasdaq was the real performer from the US Markets - up 2.3%.

The only stock market to sell off was the Japanese, which lost almost 1% to finish at exactly 9500.0.

On the currency front, the markets were mixed for the week - however the USD was certainly the bell weather currency in terms of strength. The USD regained a bit (a very small amount we should point out) of lost ground against the Euro and also the JPY - but was weaker against the Pound by 1.3%.

The final print for the GBP/USD was 1.6056 - which was as we said, 1.3% lower for the USD than the close on the previous week.

Against the Euro and Yen, the final prints were 1.4089 and 81.11 respectively. As you can see - the levels of the USD/JPY are still very much a cause for concern, and the risk of intervention by the Japanese Foreign Ministry still remains very much in check. Previously, the acceptable level for the Japanese central bank was 82.00 - however the USD/JPY has clearly been trading under that level for some time now and yet intervention hasn't been forthcoming.

We therefore believe that now that the G7 meetings are over, there is the very real risk that the central bank will go ahead and pull the pin on the level of the USD/JPY - hopefully pushing it higher to relive some of the pressure on the exporters in the Japanese economy.

On the commodities markets, oil was lower at $82.50 per barrel, and the value of gold yet again rose - closing the week at a high of $1,377.3 per ounce.