US Dollar Rises as Geopolitical Tensions Ease
By TLB Contributing Writer: Andrew
The US dollar has recorded a rise according to the dollar index. The dollar gained in the forex markets when weighed against the major six currencies at the market. The slight gain in the currency basket has been recorded in figures as being equal to 0.39%. The final value of the of the dollar after the slight increase was 94.09. There are many factors that can result in the strengthening of the dollar. For this week though, it seems that the major factor that helped the dollar is the political news that has brought in some positivity in the markets.
Trump and North Korean Leader Likely to Meet
The issues surrounding North Korea and its leader Kim Jong Un have always had effects on the markets. In recent times though, there has been a lot of improvements in the relations between the leader and the US. This is especially after he indicated that he would be open to talks. Indeed, there has been some unprecedented geopolitical developments over the course of 2018. Even though the White House is yet to commit to a summit with North Korea, there have been clear signs that it is now more likely than ever for such a summit to take place.
The initial idea was for Trump and the North Korean leader to meet in the course of June. The denuclearization of North Korea was specifically scheduled to be an agenda of the June 12 meeting that is supposed to take place in Singapore. The plans for that meeting seem to be still on course after a possible interruption. As the week progressed, the trading activity did slow down over the Memorial Day period. The markets remained closed for Memorial Day.
The Economic Impact on Local Markets
The dollar movements definitely come with significant impacts on the economy. To start with, forex traders are usually the first to see the effects of the rise or fall in dollar value. The forex market has numerous platforms that transmit news and current events quickly to traders. Popular trading platforms like Meta Trader 4 come with both a trading interface as well as live market news feeds. Other than traders, average consumers also notice changes in prices of goods after some major developments in the currency exchange markets.
Even though there has been a dismal performance in the economy, the dollar has barely seen any change as a result. The performance of the economy this year has not been very good. Much of the statistical data that has been recorded over the course of the year has shown that the economic targets have not been met. Even though there has been a slight increase in the economic performance, it is still not up to the levels which were highlighted as part last years projections.
Durable goods, for instance, fell to levels that were much worse than what was forecasted. According to reports, the fall accounted for up to 1.7% even though the projections were effectively put at about 1.4%. A report from the University of Michigan also showed that there was an overall fall in consumer expectations which prompted the Consumer Sentiment Index (MCSI) to be revised from the initial figure of 98.8 down to the current figure of 98.0.
The Performance of Other Currencies
In the currency market, the other currencies fared differently based on other varied circumstances. The Yen held its position in the market with a slight USD/JPY change upwards to 109.37, accounting for a 0.37% change. Further afield in the UK, the un-revised economic data was partly a cause for the slight GBP/USD fall of the Sterling Pound to 1.3319, a total change of 0.44%.
The current developments in Spain were partly responsible for the dismal performance of the Euro. The ongoing political crisis and lack of confidence in the Spanish prime minister have been affecting the performance of the Euro the whole of this year. Prime Minister Mariano Rajoy’s party has been severely reprimanded by the judicial system for rampant corruption in Spain.
In the market, the Euro EUR/USD dropped to 1.1666 in the wake of the crisis. This represents a 0.45% drop from its previous position.
The Australian dollar did not record any increase either, the AUD/USD rate fell to 0.7559, representing a 0.22% decline while the NZD/USD rate closed at 0.6922, a fall of 0.04%.
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