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THE TAKEAWAY: The U.S. Dollar moved higher early in the week as the RBA cut rates to a historical low, but large moves came as the jobless claims fell and Fed released a positive outlook.
The U.S. Dollar had a fairly subdued start to the week as it trended higher against its Australian counterpart as traders speculated that the RBA would cut rates. Confirmation came as the Reserve Bank of Australia announced that it would cut rates by 25 basis points to an all time low of 2.75 per cent.
The Dollar then consolidated some of its gains before the so called ‘Aussie’ clawed back some of its initial losses on news that the Australian economy added 50,100 jobs in April, surprising economists. The Greenback then waited patiently for the Jobless Claims to be released which fell 4,000 to 323, 000 as of May 4th. The Dollar rallied on the news which saw investors turn optimistic on the world’s largest economy. The Greenback surged higher still as Philadelphia Federal Reserve Bank President Charles Plosser told members of the audience in New York that he expected that economy to grow 3 per cent in 2013 and 2014. Plosser also expects unemployment to reach 7 per cent by the end of 2013, and 6.5 per cent by the end of 2014, as well as outlining that the Federal Reserve has limited capability for more easing. This sent the U.S. Dollar Index rallying past 10,600 as investors sought to seek United States denominated assets.