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The move back into USD did not last too long as was mainly attributed to the fear factor surrounding Dubai. As the markets started to feel more comfortable the USD fell pretty much across the board. EUR/USD again pushed through 1.5050 and then through the 1.51 level, GBP/USD also gained back to the 1.66 level. Apparently unnamed sources from the ECB are saying that ECB officials are not concerned about the recent euro strength against the USD- not sure I believe that. This week we have the ECB and the improvement in economic data recently has caused speculation that the ECB will turn more Hawkish in their approach to monetary policy. The problem with this is that it would lead to further euro strength if the ECB move before the US Fed and this will certainly be an issue on the agenda for the ECB going into Thursday’s interest rate meeting.

The forex markets will be heavily influenced by the monetary policy strategy of major economies. The higher yielding currencies in particularly the AUD have performed well lately as a move out of fear into yield is becoming more apparent. The same philosophy has led to the rally in Gold and commodities to new highs. At the moment the Bank of England are the most dovish out of the major central banks contributing to the weakness in the pound. All major economies have introduced unconventional measures to help their ailing economies; the first to look at exit strategies and interest rate rises will equal a stronger currency.

Today is another quiet day on the data side with the main interest likely to be the release of the Fed’s Beige Book this evening. Tomorrow we have the ECB rate decision and on Friday we have payroll data from the US

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