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Jameel Ahmad, Chief Market Analyst at ForexTime (FXTM), provides his perspective on the month of June and how the markets performed, as well as what influencing factors created demand for certain instruments over the course of a month in which the USD has been in great demand, and multi-asset brokers are experiencing increasing commodities volumes.
There were two distinct phases for the majors in June – before and after the Federal Open Market Committee interest rate decision in the middle of the month. The US dollar moved higher against the euro in the first two weeks, rising to 1.1400 per euro from 1.1110 on the back of investor fears over Greece’s debt crisis and increased anticipation ahead of the FOMC’s interest rate announcement on June 17th.
Then, the FOMC reiterated its dovish position on raising US interest rates while keeping the key rate at a record low of 0.25%. This disappointed the bulls, prompting a dip in USD strength and a corresponding rise in the pound sterling, euro and gold prices.
After that, not even Greece’s long-drawn out negotiations with its creditors could put a dent in the euro and cable rally, and in the last week of June, there was renewed hope following Athens’ new economic reform proposals to the Eurogroup.
The Cable started out the month at the level of 1.535, and by June 18th, it had risen to the level of 1.594. A closer look reveals a strong spike of 600 pips against the USD on the back of FOMC lukewarm attitude to the US economic recovery on the 17th. This tailed off somewhat, following a drop of 100 pips, but the rally was still impressive considering the underlying economic headwinds in the UK, including deflation.
The Dollar generally provided direction for the Pound throughout June and with the sentiment towards the Dollar being weak, this inspired the GBPUSD bulls to rally strongly.
While the GBPUSD managed to reach an unexpected 2015 high at 1.5929, there is no justification for the pair to be so highly bought when you take into account that we are still at least one year away from a UK interest rate rise. Once traders realised this, they enjoyed finding a sell-on rally opportunity and it would not surprise me if the GBPUSD concluded the month around 1.56.
Gold was another headliner in June, with the metal’s value rising abruptly on USD weakness. The impact of the FOMC’s dovishness cannot be underestimated; on June 17th, gold was at the level of 1,175 USD per ounce. By the very next day, it had risen to 1,201 USD per ounce, once again demonstrating its value as a safe-haven investment for when the USD dips.
The USD was always going to be vulnerable to profit-taking throughout the second quarter of 2015 because the markets completely overhyped the US interest rate outlook and the Federal Reserve were never going to be in a hurry to begin raising US interest rates. A mixed sentiment towards the USD is positive news for the Gold bulls and traders enjoyed purchasing the metal for short-term trades. With that being said, we are now entering the quarter of the year in which I expect the Federal Reserve to begin raising rates and this means opportunities for Gold will be far more limited.
Looking ahead into July, US Non-Farm Payrolls are due to be reported on the first Friday of the month, and this key indicator could set the mood for the USD to resume its strength, provided the numbers come in better-than-expected.
This is a Guest Editorial which was compiled by, and represents the viewpoint of Jameel Ahmad, Chief Market Analyst at ForexTime (FXTM)