The U.S. dollar rose against the EUR and British pound on Wednesday, with the euro extending losses after Portugal's austerity plan was summarily rejected by its Parliament. By yesterday's close, the USD rose against the GBP, pushing the oft- traded currency pair to 1.6250. The dollar experienced similar behavior against the euro and closed at 1.4100.

 

Traders have started to focus more on fundamentals such as economic growth and short-term interest rates. That shift just getting underway, could take the shine off the soaring USD in the coming months. A stronger currency is important to the U.S. because it entices foreign investors to Treasury debt that finances the nation's record budget deficit. The downside is that it may restrain profit growth at companies with international sales by making U.S. exports more expensive.

 

Looking ahead today, the news event that may have a very large impact on the dollar and its main currency pairs in today's trading is the Durable Goods Orders report around 12:30 GMT. This report is very important as likely to impact dollar volatility. Traders should pay close attention to the market as there is an opportunity for traders to capitalize on the fluctuations which are likely to follow this release.

The euro fell against most of its major currency pairs on Wednesday on concerns a political crisis in debt-ridden Portugal could force the government to seek financial aid, though currency losses should be limited, given expectations of rising euro zone interest rates. Portugal's parliament was expected to reject austerity measures, setting the stage for the possible collapse of the minority socialist government a day before a European summit. Portuguese bond yields rose as investors priced in increased risk of a debt restructuring.

 

The euro zone has a few reports scheduled for today but most of the attention will be on the EU Economic Summit meeting. Depending on the statements being released from the meeting of European Union countries, it may be difficult to gauge the direction of the euro and traders should be aware of the heightened volatility in today's market.

 

The EUR/USD pair today probably continues to decrease about the 1.4000 level.