Optimism Erupts in US on bin Laden Death, Supported by PMI Data



The US dollar received a surprise boost in today's trading following the announcement by President Barack Obama that al Qaeda headman Osama bin Laden was killed in a raid into a Pakistani town just north of Islamabad. The celebrations erupting throughout US cities created an atmosphere of euphoria that has assisted in a short-term rebound in optimism which lifted the dollar in today's early trading hours.

Though bin Laden's death is not an event directly linked with market activity, the news came at a time when both Europe and Japan were experiencing thin trading environments from holiday celebrations . As such, this surge in excitement regarding the political sphere of American life spilled over into the illiquid market generating a mildly bullish bump to the greenback.

The dollar quickly rebounded against a number of its rivals, with the EUR/USD pushing towards 1.4807 from its recent 17-month high of 1.4900. Economic data releases, however, have pushed the pair back into its bullish channel, currently returning to the aforementioned peak.

Following this morning's announcement, the Institute of Supply Management ( ISM ) also published its Manufacturing PMI data, as well as its report on manufacturing prices, both of which showed higher than expected growth in production inflationary figures. The report coincided with data which revealed a 1.4% jump in construction spending, beating out forecasts for a 0.4% growth, which further supported the notion that May housing figures should be higher than April's.

These economic data releases, along with the announcement of bin Laden's death, assisted in a short-term rise in greenback values, but also assisted in the rapid rebound as traders took cue to take profit on the dollar by remembering that very little is supporting its current rise outside of short-term speculation. The buck has now returned to its bearishness and appears to be on track to remain as such for the rest of the week.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.

This article appears in: Investing , Forex and Currencies

Referenced Stocks: ISM



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