Mar 31 2008
Chicago PMI On Tap - might restart the USD Drop Again
The Greenback heads into the last day of March prime for what could be one of the more defining points of 2008. After last week’s mixed batch of economic data out of the US, the Dollar plunged against a majority of its most traded currency rivals, most notably the EUR. It was not to long ago; following the last 75bp cut, that investors thought the greenback was pulling itself out of the mud to finally ride a significant bullish trend. Instead, we enter April prime for what could be a period of record lows for the Dollar and the US economy. The US has seen its fair share of bad data, but what is so alarming lately, is the harmony at which data is failing. The housing market continues its freefall, taking with it any progress the credit sector might have made in recent future due to rates cuts, to bring the dollar to its current state. Add to that the drop in Consumer Confidence and a hefty unemployment figure from the US and suddenly talks of Recession become far more realistic.
This week will see a wide range of key economic events from the US economy. ISM Manufacturing and Non-Manufacturing numbers, Factory Orders, Unemployment figures, and the ADP Employment Report highlight a busy economic week in the US. Also we await the testimony of Fed Chairman Ben Bernanke before the Joint Economic Committee of Congress on Wednesday. Bernanke will look to explain the currently grim outlook of the US economy, as Fed intervention has not provided enough to turn around the recessionary trends. Bernanke is also expected to hear questions regarding new strategies to tackle the shift in consumer behavior in the US, as we have seen an uncharacteristic fall in US consumer spending. The Fed boss will be faced with the dilemma of whether or not to sacrifice long-term strategy to cope with short-term turmoil in the market. Whatever the outcome may be from his testimony, Bernanke’s comments and the figures due for release will pave the way for Friday’s important Non Farm Payroll data, easily one of the most volatile events on the economic docket.
Non-Farm data is expected to show that lat month another 50,000 jobs were lost, marking the third consecutive month of such behavior. Not since the onset of the Iraq War on 2003 have we seen such results. The importance of Non-Farm payrolls has been proven over and over again, as it is the most accurate employment report available, and without fails contributes radical volatility to the market each time it is released.
Today we are expecting two economic events from the US. First we see the release of Chicago Purchasing Managers Index (PMI) followed by a speech by Treasury Secretary Henry Paulson. The PMI figure, which measures the health of the Chicago business environment, is expected to see a 1.5-point bump, but still fall short of showing any expansion, an accurate representation for most of the US these days. Paulson will discuss his proposed regulatory plan for the US economy; it should not contribute to market movement. It will be expected that until any surprisingly positive US data is released we will see bearish greenback trends throughout the Forex market. Commodity prices can also be expected to see a hike, as they are all still dollar dependant.
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