– From “The Brewer Blog”, by Brewer Investment Group –
The lack of fresh economic news kept the Forex markets in check most of the day but the U.S. Dollar did post a gain against most majors. The gains and losses were split between relatively lower yielding European currencies and the higher yielding Pacific Rim currencies.
The EUR USD started the day slightly better led by the performance in European equity markets but turned negative throughout the U.S. session. Fed Chairman Bernanke’s upbeat comments on Friday seemed to have worn off with traders instead choosing to focus on the more subdued comments by European Central Bank President Trichet. Thoughts that the U.S. economy was recovering faster than the Euro Zone may have also weighed on the Euro.
Traders continued to press the GBP USD lower in a move that began August 6th when the Bank of England announced an increase in the funding for its asset-buyback program. This announcement is being perceived as bearish because it is basically a license to print money. Furthermore, the prospect of a huge budget deficit is also being seen as a major negative.
The Dollar gained back some ground versus the Swiss Franc. Last week the USD CHF was under pressure after the Swiss National Bank decided to sell its interest in UBS after the banking giant reached an agreement with the U.S. Internal Revenue Service. This news sent a signal that the Swiss banking system had stabilized. [entire post]