Last week ended with a spectacular rally by risky assets. This week, though, appears to be reversing course, at lease a little bit. Risk assets are pulling back in light of some developments regarding the US economy. Manufacturing activity is weighing on risk currencies, and providing something of a boost for the US dollar.
US dollar is heading higher today, gaining as concerns about the economy rise, and some forex traders engage in some profit taking after the rallies that ended last week. The news that European leaders managed to make some progress toward a solution to the eurozone debt crisis helped spur gains for risk assets last week.
This week, though, there are concerns about the US economy. Manufacturing activity in the United States dropped during June, and for the first time in about three years, is in contraction data. The ISM, a measure of such activity, dropped to 49.7%, down from 53.5% in May.
With this news, concerns are once again focused on overall economic troubles, and this is, in term, causing many Forex traders to turn to safe haven assets. The US dollar is getting a boost against high beta currencies, but dropping against the Japanese yen.
At 14:26 GMT EUR/USD is down to 1.2577 from the open at 1.2678. GBP/USD is down to 1.5678 from the open at 1.5698. USD/JPY is down to 79.5030 from the open at 79.8650.
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