The EU Morning Report - Dollar Strengthens After FOMC Minutes - 21 August 2014


Currencies

  • The euro (EUR) crashed yesterday against the US dollar (USD) at 1.3245, the lowest point since September. Today the European Manufacturing and Services PMI will be announced and are expected to be at 51.4 and 53.6.
  • The US dollar (USD) continues its bullish trend against the Japanese yen (JPY) to 103.873. The dollar was the strongest currency yesterday as at the FOMC Meeting Minutes the Fed officials said that the Job gains might bring the interest rates rise faster, but the labour market needs to improve. Today the US Unemployment claims will be announced and are expected at 302K.

Equities

  • The US equities rose yesterday as the Fed officials said during the FOMC that the Job gains might help the interest rates to rise faster. The US 500 (SPI) advanced to 1983, the US 30 (DOW) climbed to 16946 and the US Tech (NDQ) went to 4037.

Commodities

  • Gold (XAU) fell from 1297 to 1275 as investors expect a stronger dollar after a potential rate hike from the Federal Reserve coming sooner than initially thought.

Mover & Shaker with forex options

  • The British Pound (GBP) continues its bearish trend against the USD dollar (USD) at 1.6567. The cable rose on the Monetary Policy Committee Official Bank Rate Vote as there were two positive votes on increasing the interest rates, before dropping to its 4-month low on the release of FOMC.
  • Option traders may consider constructing a Back Spread Strategy with Puts on the GBPUSD and gain if the pair moves lower, while the risk is limited to the premium paid..
  • A Back Spread Strategy with Puts can be constructed by selling an at the money Put while buying an out of the money Put at double amount.

Written by Demetris Constantinou
Currency Strategist at easy-forex®