The dollar found support close to the 1.29 level against the Euro in early Europe on Thursday and secured a partial recovery ahead of the US trade data with some support evident from terrorism concerns.
The Euro’s inability to strengthen resulted in a more robust US currency rally to a high of 1.2750 in New York as short dollar position positions were reduced. Underlying dollar sentiment remains fragile with the markets looking for more attractive levels to sell the US currency and it retreated back to 1.2790 later in US trading. The dollar again tested levels near 1.2750 in early Europe on Friday before retreating to 1.2785.
The US trade deficit fell to US$64.8bn in June from US$65.0bn in May, although the May deficit was revised up significantly from the US$63.8bn reported previously. There was a record level of exports and imports which did not offer any great evidence on the competitive pressures facing the dollar while the deficit continued to be inflated by a record level of oil imports. The deficit remains a long-term negative factor for the dollar.
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