What to Expect for the US Dollar on Monday (page 2 of 2)

Meanwhile the Swiss Franc has also staged an impressive rally today, confirming that carry trade liquidation is the main theme in the markets. EUR/CHF has sold off for seven consecutive days, which is something that we have not seen since the beginning of the year and is particularly rare for a currency that usually range trades. The week ahead also delivers a busy calendar for the tiny country, with the KoF leading indicators, CPI and GDP the most important releases.

British Pound - The weakness of the US dollar has pushed the British pound higher for the sixth straight trading day despite slightly weaker GDP data this morning. Even though the quarterly growth rate remained unchanged at 0.7 percent, the annualized growth rate fell from 2.8 to 2.7 percent, led primarily by a decrease in consumer spending and a sharp drop in exports. It seems that the strength of the British pound may also be catching up to the economy. However unlike the Eurozone, the UK is less export dependent which means that the strength of its currency should have a smaller effect on the economy. There are only a handful of releases for the UK next week, most of which are housing related.

Japanese Yen - The Japanese Yen is now trading on the 115 handle against the US dollar, which is something that we have not seen since the beginning of September. The fact that the Japanese Yen actually sold off against every other currency indicates that the liquidation is primarily out of dollar based carry trades. There are a number of speeches by Bank of Japan officials next week that can decide whether we will see a near term bottom in USD/JPY. If Fukui and Noda reiterate the comments made by BoJ member Fukuma overnight, then we could see support come into the currency pair. Fukuma said that there is no preset timing with regards to monetary policy. The BoJ is continuing to play this game of giving the market a little and then taking it all back, which hurts their credibility.

Commodity Currencies (CAD, AUD, NZD) - The commodity currencies are also stronger as commodity prices tick higher. The $10 rise in gold is particularly beneficial for the Australian dollar while the possibility of tax cuts suggested by Canada's Finance Minister last night has helped to cause a massive rally in the Canadian dollar. Even though the trade deficit in New Zealand hit a horridly new record high, the rise in the other commodity currencies has pushed the Kiwi higher as well. The main economic releases from the commodity bloc next week will be trade data from Australia and Canada along with Canada's GDP and employment reports.