USD Forex Weekly Archive
Daily Economic News - Apr 16, 2008
Yesterday, the Greenback spent most of the trading day with bullish momentum against the majority of its currency pairs and crosses on the back of surprisingly strong U.S inflation and manufacturing data releases. The greenback added 0.35% to its value against the EUR locking the session below the rate of 1.58, after the first day this week for the USD to appreciate. Also, the strong U.S data release assisted the USD recovery against the Sterling and the JPY, stopping the bearish momentum which characterized the USD since Bernanke's speech last Wednesday.
We see yesterday's surprisingly strong U.S. economic data as a benchmark in the US financial crisis calendar. Those figures could be the first that clearly indicate that the US market is better condition than previously perceived.
March's PPI release yesterday came at the reading of 1.1%, well above February's inflation rate of 0.3%. Also, the important figure of the Empire State Business Conditions Index, which measures the general business conditions of manufacturers in New York State in March, showed a much higher than expected level of general business activity at the rate of 0.6, well above February's reading of -22.2. The figures released yesterday, combined with higher than expected cross-border foreign and domestic purchases of long-term securities in March, raise speculations that the sharp financial crisis in the U.S. seems to be controlled and finally restrained by the Fed's actions and interest rate cuts. Those positive figures also assist strong probabilities that the Fed is not likely to cut the key interest rate more than 0.25pts at the next FOMC meeting, if there will be a rat cut at all.
Today's colander is full of figures that could continue the USD bullish momentum and send the greenback prices even higher. March's Core CPI release is expected to show a 0.2% increase from February. Moreover, the value of output produced by factories, mines, and utilities in March, measured by the Industrial Production report released at 16:15 GMT today, is expected to rise by 0.4% from February. Forex traders should follow this figure release because it could supply many indicators for USD behavior. It is also interesting to mention Oil prices, that hit a new record, above $114 a barrel, on supply issues and rising demand in China. But the main factor contributing to high Oil prices is the weak dollar itself. The greenback is currently trading around the 1.58 level against the EUR; making safer commodities like Oil more attractive for dollar investments. In addition, due to oil being dollar denominated, as the dollar weakens, Oil prices should increase by relatively the same percentage. Also today, traders will await the Fed's report on regional economic activity, known as the Beige Book. As a summary of economic conditions throughout each of the 12 Fed districts, the report could give key insight into how the FOMC will vote on April 30. Overall, the outlook for the USD seems favorable. The latest positive fundamental data signals that the Fed cannot keep cutting Interest Rates aggressively while the economy is not deteriorating as fast as it was previously expected.
Daily Economic News - Apr 15, 2008
The dollar responded yesterday to Sunday's opening session by recovering against most of its major currency rivals. What was interesting to see was the small recovery, which was made, despite a day of positive economic figures. At the opening of the market this week the EUR/USD pair opened 150 pip below its closing point on Friday, but the dollar was not able to sustain the momentum created mainly by the G-7 Meetings. Instead, the pair raced back to its Friday mark at just above 1.58, and is now trading near 1.5860.
Yesterday, as the US and European markets came back to liquidity the remarks by G-7 nations at their annual meeting and a basket of US economic data allowed the dollar some breathing room. The G-7 expressed their concern in regards to the overall state of currencies across the world, created in most part due to interest rate movements, mostly out of the US. The cause for concern toward the dollar sent investors on the hunt to buy the greenback, which helped it form a bullish trend.
Yesterday, we saw the release of several key US news events, namely Core Retail Sales. The figure, which measures overall retail sales (excluding automobiles), saw a 0.1% rise from its previous result, which did help bring some confidence back to the dollar as it saw positive activity in the Forex market. In addition, Retail Sales saw a 0.2% rise as well, but was offset some what by another month in rising Business Inventories. On any other day, the dollar should have seen more substantial gains, but the overall concern over the state of the US economy has kept investors skeptical of any real change in the dollar.
Look ahead to today, we have a batch of very important US data. We expect the release of the Empire State Business Conditions Index that measures the general business conditions of manufacturers in New York State. It can be used as a precursor to National Manufacturing numbers. The figure is expected to be negative, shedding almost 5 points of its previous mark. Also we await the 12:30 GMT release of PPI, which measures inflation in the US. The result should see a 0.6% boost since last month. Finally expect TIC Net Long Term Transactions to come back with a slight drop since last month. Overall these events should move the dollar up if they return with as forecasted positive results.
Daily Economic News - Apr 14, 2008
Last week we saw the return of significant volatility to the Forex market. Amidst fears of Recession in the US, due to the housing and credit crisis as well as poor labor numbers, investors once again became weary of the dollar. The last part of March heading into April saw the greenback swing up and down after a host of key events and interest rate cuts dictated its movement. Different to last week, was the concern voiced by top US officials about Recession, this was also accentuated by what experts have called the most concerned American consumer base in the last 25 years. In response to worries, the dollar fell against most of its major currency rivals, seeing record lows versus the EUR. The $159.13 rate had some believing the dollar would see drastic losses, as the week ended the pair closed at a little over 1.58.
This weekend saw the Group of Seven (G-7) Finance Ministers and Central Bankers met in Washington D.C. Economic leaders from the United States, Japan, Germany, United Kingdom, France, Italy, and Canada met to discuss a host of economic issues. Surprising to some was the amount of concern held toward currency values and interest rates. It is no secret that the US and to some extent the UK have has to use interest rate cuts as last resort solutions to stopping the economic crisis that face their nations, especially in the US. The concern voiced over the dollar sent a shockwave through the currency markets, as weekend movement helped the opening of the EUR/USD pair in the Forex market to drop 150 pips.
The specific concern is the fear that unstable exchange rates will retard the world economies marketplaces. Also becoming increasingly worrisome is the rise in food prices around the globe. Essentials like Rice and Wheat have seen abnormal price gains, to the extent that countries both rich and poor are feeling the effects.
As a result of the development from these meetings, investors are expecting more dollar bullishness mainly against the EUR. Investors will likely look to buy dollars to recover losses felt from the weekend shift in prices.
Looking ahead to this week, we expect to see a host of key economic data from the US which if positive could contribute even more to dollar bullishness. With intervention unlikely at this point by the G-7, US data will likely drive market trends. This week we expect to see a wide range of figures from all economic and production sectors in the US. Most notably, we await the release of the Empire State Business Conditions Index, PPI, TIC Net Long-Term Transactions, Core CPI, Industrial Production, Unemployment Claims and the Philadelphia Fed Manufacturing Index, all of which can contribute to movement in the market. These will be headed by today's release of Core Retail Sales, as the index is expected to show that last month saw a small rise in retail sales. We can also expect Business Inventories and a speech by Fed Governor Warsh. Volatile movement surrounding the Retail Sales release is likely; as a result bullish dollar behavior should be expected.
Daily Economic News - Apr 11, 2008
Yesterday, the USD fell to its record low against the EUR, but pared losses after ECB President Jean-Claude Trichet's unchanged inflation views did not give the single currency an upward momentum. As a result EUR/USD sold off sharply, falling to a near low 1.5725, after surging to an all-time peak of 1.5912.
Currency analysts attribute the greenback's return from a historical low of 1.5915, mainly to short USD selling and profit-taking. Fundamentally, the dollar is still weak. Traders ignored data showing that the U.S. Trade Balance widened unexpectedly to $62.3B in February from $59.0B in January. Analysts previously expected a shortfall of $57.5B.
The import /export situation is not any better. The U.S. exports in February climbed 2.0% to $151.36 billion from $148.38 billion, while the imports rose at a faster pace, up 3.1% to $213.68 billion from $207.34 billion.
Although U.S. trade deficit with China shrank in February, the deficits with other major trading partners climbed. For instance, the deficit with Japan rose to $6.88 billion from $6.59 billion. The trade gap with the Euro zone increased to $6.00 billion from $5.12 billion. The same is with Canada and Mexico.
As for today, the G7 meeting will probably keep traders on their toes. The sentiment is that there is unlikely to be any changes to the G7 statement on currencies, but with the USD looking rather sickly, traders tend to believe that the G7 might seek to support the faltering greenback.
In addition, today, we expect the Import Prices and the University of Michigan Consumer Confidence reports to be dollar positive mainly due to the improvements in the weekly Consumer Confidence reports and the sharp rise in commodity prices.
