Euro Rallies To Three-Week High Against US Dollar

In early Monday trading, the Euro continued to bob along the bullish wave that brought it to a three-week high of 1.5840 against the US dollar, before retreating back below 1.5780. Oil again rallied to another record high of $143.67 per barrel, so where else could the dollar go? Today’s Chicago PMI manufacturing showed some improvement in the Chicago area, posting a reading of 49.6, still in contraction territory but at least not as bad as the previous month. This may stem the fall of the dollar as we enter the New York trading session. The US dollar’s fate this week will be determined by the US ISM manufacturing data to be released on Tuesday and the all-important non-farm payrolls reports for June on Thursday. A peek at the health of the labor market can be gleaned from Wednesday’s ADP private-sector report.

Today European Union Commissioner for Economic and Monetary Affairs Joaquin Almunia said the Euro is overvalued. He didn’t give a straightforward message though. “Its too high right now,” he told the European Parliament’s economic committee. However, he said that while the Euro’s exchange rate is elevated, it “isn’t exaggeratedly so.” That could be perceived as a green light for Euro bulls to bid the currency higher since its strong value isn’t “exaggeratedly so”. Meanwhile, US Treasury Secretary Paulson said in a radio interview in Moscow that he believes a strong dollar is in the interest of the US - the same rhetoric from the government.

Economic Calendar for Tuesday:

Reserve Bank of Australia rate decision 0430 GMT (rate expected to stay at 7.25%)

UK Nationwide house prices 0600 GMT

German retail sales 0600 GMT

UK PMI manufacturing 0830 GMT

Eurozone unemployment rate 0900 GMT

US ISM manufacturing 1400 GMT

Posted in Categories: Economy, Forex.

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