USD Forex Weekly Archive

Daily Economic News - Apr 30, 2008

Yesterday, the USD gained against most of the major currencies on speculation the Federal Reserve will signal that it has finished lowering Interest Rates after 6 reductions since September. The dollar traded at 1.5559 vs. the EUR at 6:10 a.m. in Tokyo, after rising 0.6% yesterday and touching 1.5541, the strongest rate since April 3. Futures on the Chicago Board of Trade show an 82% chance the Fed will cut the target rate for overnight lending by a quarter of a percentage point to 2% today and odds of 71% that the rate will be held at that level in June. Only a week ago, the USD plunged to a record-low against the EUR, boosting demand for raw materials as a hedge against inflation. Now, following the rising confidence in the US currency, commodities dropped the most in 5 weeks as a rally by the USD eroded demand for energy, metals and crops as alternative investments. A stronger dollar will reduce some benefits for US exporters, but it could help curb inflationary pressures. Currency analysts attribute the greenback's return from a historical low of 1.6017, mainly to short USD selling and profit-taking. Fundamentally, the dollar is still weak. The majority of indicators reflect major weakness in the US economy. Today we expect heightened USD volatility to continue as the 1st quarter GDP figures are scheduled for release at 12:30 GMT. Gross Domestic Product figures may show that the US economy shrank in the first quarter while Friday's jobs report is also expected to show payrolls fell 80,000 in April. The ADP Nonfarm Employment Change and the Chicago PMI figures are also due to be released today. These market moving indicators are also forecasted to set a lower result in comparison to the prior month. A result below the expectation will probably produce bearish momentum for the USD, as it would be clear proof that the world's largest economy is in a stage of contraction. On the other hand, a reading in line with expectations isn't likely to spark much reaction as traders will be anxiously awaiting the FOMC decision as well as Friday's Nonfarm Employment Change.

Daily Economic News - Apr 29, 2008

Yesterday the greenback showed off a bullish trend against its major currency rivals. It went through a bullish volatile session vs. the EUR, yet it lost strength against the GBP and the JPY. Even though the USD went through mixed trends yesterday, its main goal remained in tact as it kept a steady rate within the EUR\USD pair, trading around the 1.5645 range. The most significant unfavorable news for the USD came from Japan. The Japanese who hold 12% of U.S government debt (over $550 billion) have suffered their worst quarter in treasuries in the last 10 years because the USD\JPY recently depreciated to its lowest rate since 1995. As a result, more and more Japanese investors are looking for different currencies to invest in, especially the EUR. Crude Oil seems to be another factor in the greenback's trend as it reached an all time high of $119.93 yesterday. As for today, very meaningful data is scheduled at 14:00 GMT as the Consumer Confidence survey results are due. The figures are forecasted to decrease by 2.5 points, from 64.5 down to 62.0. The main reasons for the lower confidence are the worrisome employment situation, which count greatly in the survey, and the rising price at gas pumps, that rose by $19 over the last month. Lower reading points demonstrate certain pessimism by U.S consumers regarding the American economy, which may very well create bearish inclination within USD pairs. Traders should stay tuned to the ongoing data releases from the U.S as it's looking to be a crucial point for greenback's future. Bullish behavior is imperative for the USD at the moment, as continuity of bearish trends might result in a long term falling trend for the greenback.

Daily Economic News - Apr 28, 2008

Last Friday, the greenback kept up its sharp bullish momentum against most of its major rivals. The USD gained as a result of favorable economic data, which was released from the US during the last week, combined with disappointing indicators released from the Euro-zone. The USD added almost 1% to its value against the EUR, appreciating from Wednesday's all-time low of 1.6017. The greenback also climbed to a 2 months' high vs. the JPY when it closed trading at 104.80. By midday Friday, the USD strengthened against the EUR, trading in a range of 156.55 to as low as 155.90. Speculations on the FED halting Interest Rate cuts and a rally on the dollar during the week, which may have led investors into taking profit ahead of the weekend, supported the dollar during trading session. It's a major shift in sentiment regarding the outlook of Interest Rates and we may see the dollar strengthening until the next Fed meeting. The perceived odds of the Fed keeping its benchmark Interest Rate unchanged at 2.25% at its meeting next week rose to about 26%, according to the futures. Just over a week ago, futures were evenly split between a 25- and a 50-basis-point cut. Also, a number of important growth data will be released this week, including Q1 GDP, ISM Manufacturing and Non-Farm Payrolls. NFPs are expected to fall negative for the 4th consecutive month, indicating that consumer spending will continue to deteriorate as record high energy and food prices sap disposable income. Tuesday's economic data will likely highlight some of the reasons why traders are ramping up speculation that the country is in midst of a recession. Markets are expecting some poor numbers which does not leave much room for a downside surprise. Until then, we expect last week's positive indicators to keep supplying traders with reasons to buy USD.

Daily Economic News - Apr 22, 2008

Yesterday, the greenback lost ground on what had been a bullish closing to last week's trading. The US was absent from the day's economic calendar, which pushed the Dollar to record lows against the Euro in particular. The greenback has struggled to make a steady recovery against its major currency rivals, as bullish trends have proven to be short lived lately. With so many contributing factors to the fate of the dollar and the overall importance it has on the global economy, many investors still believe the greenback has the ability to recover, even with the current state of affairs. Last week's unemployment numbers were better than expected along with the Empire State Business Conditions Index, and events for the week to come could contribute to the greenback. Yesterday, EUR/USD prices soared towards the 1.6000 level. A contributing factor in the rise of the major pair were stock market losses brought about by Bank of America reporting a sharp drop in their income. The bank, currently the second largest in the US reported quarterly losses that sent US stocks to their first losses in 5 days. Today, we should expect a much more volatile market due to US news events on tap. At 14:00 GMT we expect the Richmond Fed Index, quarterly House Price Index and the Fed TAF auction summary, these will be headlined by the release of Existing Home Sales. The figure is forecasted to fall roughly 1.5% from last month's number and will show that Existing Home Sales slipped to $4.90M. Last month's number of $5.03M broke a six-month spell of declining sales, while annual figures from last year still trump this year's figure by just under 25%. Barring a positive surprise in these results expect to see even more dollar bearishness that could push the EUR/USD to record highs beyond 1.60.

Daily Economic News - Apr 21, 2008

Last Friday, the greenback gained against most of its major rivals on the back of the strong data from all the U.S economic sectors last week. Despite the lack of data on Friday itself, the USD recovery was assisted by the better-than-expected Empire State Business Conditions Index release and a falling trend of the Unemployment Claims figure. As a result, Friday was the best day for the USD, however short lived it was. Later on this week's economic calendar is quite full with events that could keep the USD bullish momentum. March's Core Durable Goods Orders report, which is expected to be released on Thursday, is forecasted to show a higher level of purchase orders. If indeed the final figure meets the expectations, we could also expect a negative trend in the next Unemployment Claims report released also on the same day. Friday's Consumer Sentiment figure is forecasted to reflect an improvement in the U.S economy for the short term. On the other hand, USD buyers may be concerned of the building sector data. This Tuesday's Existing Home Sales and the House Price indices are both expected to show a fall in the building sector. As a sector directly affected by the credit crisis, this week's building sector data could supply us many figures about the success of the FOMC decisions and how thy will vote on April the 30th . Although markets have grown more optimistic about the U.S. economy in recent days, investors do not seem to believe that the present financial turmoil is coming to an end. Concerns about the U.S. economy still remain high. Dollar trading should stay calm today until the release of Existing Home Sales, where we will likely see volatile behavior. We also recommend traders to follow other important data releases during this week in order to get supplied with figures that may show which direction the greenback is more likely to be dragged on.

Daily Economic News - Apr 17, 2008

The USD extended losses yesterday after the economic reports from the U.S. showed lower than expected inflation and a sharp fall in Housing Starts, suggesting more possible Federal Reserve Interest Rate cuts ahead. The greenback depreciated 1% reaching 1.5979 vs. the EUR from 1.5790 during the prior trading day. A separate report showed yesterday that U.S. Industrial Production rose 0.3% in March, beating economists' forecast for a 0.1% decline. But despite the surprising printing, the news had little impact on the greenback, failing to halt its descent against the EUR. Also yesterday, a government report showed that U.S. Consumer Prices rebounded in March mainly due to the rising Oil prices. The inflation buildup comes as Oil prices hit fresh record highs in recent weeks, pushing up the price of gasoline. Crude Oil topped $115 a barrel Tuesday, resulting in a 19% gain so far this year. Moreover, rising inflation complicates the Fed's task to keep pumping enough liquidity into financial markets to ease turbulence. The credit crunch and housing downturn are also hurting the broader economy, with Fed Chairman Ben Bernanke recently acknowledging the risk that the economy could slide into a recession. The Fed has slashed its benchmark rate by 3% since September, to 2.25%, and further easing is expected later this month. Futures on the Chicago Board of Trade showed investors are certain policy makers will reduce the fed funds target by at least a quarter-percentage point on April 30. As for today a bundle of crucial data is expected. The most significant news will be published at 12:30 GMT as the Unemployment Claims will be delivered. Analysts predict an increment from last month's 357k up to 375k. If the prediction is verified it will probably create harsh negative momentum within USD pairs. Later on Federal Reserve Vice Chairman and FOMC voting member Donald Kohn will deliver a speech. Kohn is one of the main individuals responsible for setting the U.S short term interest rate, and clues regarding any possible rate cut might be scattered. Investors should follow today's developments carefully for just as negative data can retain greenback's bearish trend, so can an unpredictable positive report give rise to a bullish inclination. Special caution should be taken throughout today's speeches as any hidden hint can stir up an unexpected Dollar behavior.