Jan 25 2008
The Greenback Continues to Sink.
The USD continued to take a hit yesterday as the unexpected rate cut by the Fed led to a big gain for commodity currencies. The U.S. dollar hit the 1.47 level against the EUR and last traded at 1.4760. An improvement in investors’ appetite for risk pushed the USD down vs. the high-yielding currencies such as the GBP and CAD.
Yesterday, the greenback fell against the EUR as strong German business confidence data and tough inflation comments by the ECB official dashed hopes for the next interest rate cut in the Euro zone. The USD is also pressured by the widening interest rate disadvantage after the recent “emergency” interstate rate cut. Expectations for rate cuts at the next weeks’ FOMC meeting are diminishing noticeably. The contracts are now estimating less than a 75% chance of a cut of 50bp next week. As a result, the dollar has rebounded against the JPY and given back some of its risk aversion related gains against all of the other major currencies. As for the fundamental data, yesterday, there was little reaction to a report showing that the pace of Existing Home Sales in the U.S. fell by 2.2% in December. That confirmed market perceptions that the housing market turmoil, which is threatening to push the economy into a recession, is far from over.
Also, yesterday’s economic indicator released by the Labor Department reflected a slowdown in the rate of unemployment, but didn’t help to move the market mainly because of weak Existing Home Sales figure. The U.S. House Prices also fell 1.8% which was the 1st annual decline on record.
Today, there is no economic data expected to be released from the U.S. markets. It is most likely that the prices will vary within the range of the current price corridor.
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