On Monday, the U.S. Dollar made extremely significant gains against most of its major currency pairs ahead of Barack Obama's inauguration, which takes place later today. This is in contrast to Sunday's trading session that saw the Dollar go bearish against its main currency pairs, such as the GBP and the EUR. The Dollar's rebound since the start of Tuesday's trading session has left many traders excited at the prospects of what lies ahead of them in the coming trading days.
The Dollar gained a massive 300 pips against the EUR, and a massive 550 pips versus the GBP, to close yesterday's trading at 1.3038 and 1.4308 respectively. The Dollar also rose against the JPY to close yesterday's session at 90.34. The Dollar has also continued to maintain its strength since the start of today's trading. There are a number of important factors that contributed to the Dollar's spike yesterday. These include optimism in the U.S. ahead of Barack Obama's inauguration, low trading volume, and the bleak outlook for Britain and the Euro-Zone.
As the Obama's inauguration becomes closer, the Dollar has been responding with bullishness. Investors have been attracted to the Dollar, due to renewed optimism of a new U.S. administration that may do away with adversary politics in the U.S. Not only that: it seems that there is wide support for Obama's additional $850 billion stimulus plan. As of late, he seems the only man that can rescue the U.S. from her dire economic situation. Therefore, as the excitement builds, so does the value of the Dollar.
The low trading volume on Monday, owed to few news events coming out of Europe and the U.S. as the Martin Luther King Jr. bank holiday also helped the Dollar gain strength. Adding to this, officials from the European Central Bank (ECB) said that the Euro-Zone's economy is likely to slump 1.9%, rather than the previously forecasted 1%. This obviously added to the EUR's decline against the Dollar
Yesterday, in regards to the GBP's decline, the Royal Bank OF Scotland (RBS) set shock waves through Britain and Europe as RBS's shares declined 67%. This led to renewed fears of nationalization of Banks across Britain. These different factors show that economic woes across the Atlantic may continue to support the Dollar.
The issue that may have played mostly into trading when it came to the EUR and the GBP against the U.S. is the inauguration of Barack Obama later today. Investors and most of the U.S. populous see Obama as the only man that may be able to pull America out of the worst economic crisis since "The Great Depression." This is likely to play into investor's behavior in the coming trading days too.
Traders, keep an eye on it!
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