US dollar rises by 0.26%
The US dollar index, which measures the strength of the US dollar against the major currencies, was on a bull run on July 11. The rise was majorly due to an increase in the possibility of further monetary policy expansion by other developed economies. The markets are gearing up for stimulus measures from the Bank of Japan and the Bank of England in the near term.
The odds of stimulus in Japan have increased after Prime Minister Shinzo Abe pledged to bolster the economy through the injection of further liquidity. The Bank of England is also expected to act on Thursday at its first meeting after the Brexit referendum. The European Central Bank (or ECB) might also follow suit as the Italian banking crisis is forcing ECB chief Mario Draghi to act soon.
Looking at major SPDR indexes, the SPDR S&P Metals & Mining ETF (XME) rose by 2.1% on July 11. The banking sector also gained as the SPDR S&P Bank ETF (KBE) and the SPDR S&P Regional Banking ETF (KRE) rose by 1.3% at the end of the day. Among the major SPDRs trading on a lower note, the SPDR Gold Shares ETF (GLD) fell by 0.94% while the SPDR S&P Oil & Gas Exploration & Production ETF (XOP) fell by 0.29%.
Pound is testing support levels as political uncertainty recedes
The British pound to US dollar currency pair posted the biggest losses among the currencies in Europe last week. However, the pair rose by 0.22% after it became almost certain that Theresa May would be the new prime minister of the UK. The euro was also on a downtrend against the US dollar last week with markets anxiously awaiting ECB actions after the possible easing by the Bank of England on July 14. The euro to US dollar pair was flat on July 11.
Japanese yen falls on expectations of monetary and fiscal stimulus
The US dollar to Japanese yen currency pair, which is inversely related to the US dollar and directly related to gold prices, rose nearly 2% on July 11. The rise was after Prime Minister Shinzo Abe made the announcement after winning the elections that extra stimulus measures would be required to revive the economy. The recent strengthening of the yen had been putting heavy pressure on the export-driven economy.