Tensions In Iraq Weigh On the Forex Market Sentiment

Story by David Sumner, iForex.com

Forex TradingAustralia’s Dollar depreciated after having reached the highest rate in nine months against the greenback, as mounting tensions in Iraq turned market sentiment risk-adverse. A reduction in oil supplies prompted speculators to seek safe havens.

Aussie Falls From Previous Highs

In forex trading, the Australian Dollar slipped against the greenback after having reached a nine-week high. The Aussie had rallied on domestic reports showing that the number of unemployed individuals fell by 4,800 in the month of May, even though economists predicted these would rise by 10,000. The Aussie was also supported by positive economic releases out of China which revealed that retail sales went up 12.5 percent on a year over year basis in May, after posting at 11.9 percent in April. Furthermore, industrial output climbed 8.8 percent. Analysts believe that the activity indexes have reached the bottom, and despite recently implemented measures the economy may have a tough time recovering.

Risk Aversion Impacts Kiwi

New Zealand’s Dollar retrieved from five-week highs versus the greenback as the growing tensions in Iraq fueled demand for harbor currencies. The Kiwi had rallied in the past days as the RBNZ kept its hawkish stance and raised the key cash rate to 3.25 percent just as investors anticipated. The currency advanced the most when the bank’s governor, Graeme Wheeler indicated the bank’s plans to raise borrowing costs through 2017. In the upcoming releases, the South Pacific nation is expected to show that the gross domestic product expanded to more than 1 percent on a quarter over quarter basis, hopefully vindicating the policy makers’ decision to raise the benchmark interest rate.

Greenback Gains On President’s Comments

The U.S. dollar continued to trade high against several money market majors after President Barack Obama indicated that there were currently no plans to send troops into Iraq. The U.S. Defense Secretary ordered an aircraft carrier to position itself in the Persian Gulf as extreme Islamic groups threatened to overtake Baghdad. Mr. Obama stated that there would not be a shortage of oil and no ground troops would be sent to fight the insurgents, who in the past few days took over a number of key cities like Mosul and Tikrit. On the data front, the U.S. reported that consumer sentiment declined in June from 81.9 to 81.2; and producer price inflation declined 0.2 percent in May. Core producer price inflation which does not take into account items like food dropped 0.1 percent. The U.S. Dollar rose against the Yen.

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Gary Beal