US Dollar Gains as Uncertainty Sets In

A bit of uncertainty has appeared in the financial markets, and that is helping the US dollar gain today against other currencies. Even though the spread between the three-month dollar Libor and overnight index swaps narrowed, there are still indications of stress in the markets. Uncertainty about the eurozone remains, and concerns about US retail sales are weighing on high beta currencies.

US dollar is higher as Forex traders look for a little stability and certainty today. US retail sales increased at a less than expected rate, rising only 0.4%. The disappointment indicates that maybe consumers aren’t ready to spend quite as much, and that the US economic recovery could continue to move at a slow pace.

Additionally, Moody’s cut sovereign debt ratings in Spain, Italy and Portugal. At the same time, the ratings agency reduced the outlook on France, Great Britain and Austria to negative. The new outlooks are weighing on the euro, despite the good news from Germany’s ZEW, and the US dollar is benefitting because of it.

For now, there is just enough uncertainty that the US dollar is demand again, and rising against other major currencies.

At 14:29 GMT EUR/USD is down to 1.3163 from the open at 1.3187. GBP/USD is down to 1.5706 from the open at 1.5766. USD/JPY is up to 78.1090 from the open at 77.5780.