Currencies closely linked to commodities, including the Canadian and Australian dollars, approached recent milestones on Wednesday. In addition, stock markets across Europe saw gains, which increased the market propensity to invest in riskier assets and currencies.
Stock markets across Europe started Wednesday by experiencing losses, yet was able to rebound as time passed, and they closed up on the day. Meanwhile, stock futures in the United States were indicative of Wall Street also experiencing gains on the day. Additionally, the price of iron ore jumped to a 10-month high, which benefited the Australian dollar. The currency edged upwards and is approaching levels that have not been met since last June, as it is currently trading 0.1% higher. An unidentified spot trader explained the positive sentiment seen Wednesday, Stock are rising and a generally optimistic mood about commodities like iron ore, are helping commodity-linked to resume their upward trek.”
Earlier in the session Wednesday saw the Australian and Canadian dollars falling, due to a steep decline in oil prices. Oil’s tumble was significant enough to knock the two currencies down from their respective multi-month peaks that they had risen to on Tuesday. However, oil prices were able to limit losses, and thus propped back up the assets and currencies that are closely tied to them.
The euro edged slightly upwards on Wednesday, as there was limited speculation in the markets regarding the European Central Bank’s forthcoming assembly on Thursday. Richard Benson, head of portfolio investment at currency managers Millenium Global, shared his thoughts pertaining to the ECB’s scheduled meeting, “The ECB are going to do nothing tomorrow. (ECB chief Mario) Draghi might try to play up how big their package of easing was a month ago, but I don’t think he’s really going to rattle the currency… The euro can move a couple of percent lower before the end of the month but that will just be the result of a repricing of U.S. money markets.”