Markets Closed for May Day
Weekend trading was light due to the May Day holiday. Early Monday the euro to dollar exchange rate changed in favor of the dollar as investors await a slew of economic data due this week. The European Central Bank meets Thursday and is expected to cut rates at 1% and announce other measures to address the ongoing recession.
ECB Comment Affects Currency Exchange Rates
The euro to dollar rate was affected after ECB council member Axel Weber said that Germany would not see economic growth until the second half of 2010. The statement caused concerns among forex investors affecting currency exchange rates in advance of the ECB meeting. Safe haven buying changes the euro/dollar exchange rate in favor of the dollar.
Stress Test Results Postponed
The results of the stress tests of US banks has been postponed from Monday to Thursday and the combination of the ECB meeting and stress test results should make Thursday a volatile day for currency exchange rates. Mondays trading has been volatile despite the holiday closure of British and Japanese markets. The euro to dollar exchange rate was down 0.4% to $1.3218, paring earlier gains. The dollar to yen rate rose 0.3% to 99.40.
European Central Banks Meet
Several central banks meet this week and the results of these meetings are bound to affect currency exchange rates. Central banks meeting this week are Britain, Norway and Australia. Brian Kim of UBS predicted a busy week and stated, “This week is packed, with central banks, stress test results on Thursday, US employment data on Friday - a lot of different land mines that could trip people up.”
Signs of Improvement
While many investors are expected to remain cautious this week favoring the US dollar there have been other economic factors affecting currency exchange rates. Many analysts believe that the worst of the global recession is over. Signs of economic improvement in China, the US and India has recently lifted investor risk sentiment. This week will certainly be a busy one in currency exchange markets.
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