Yesterday, the greenback continued its freefall back into a tough position against most of its currency rivals. US economic data returned unexpectedly poor and took what had been a moderate bearish trend and let it loose, forcing the Dollar back toward lows against the major currencies, most notably the EUR.Source: Wikipedia The EUR/USD pair soared back over the 1.58 key level, at some points peaking close to 1.59. This does not bode well for the Fed, as many will look towards them once again to tweak interest rates to cope with the weakening economy which may force even more negative pressure on the Dollar.
The acceleration of the Dollar’s bearish behavior came after a batch of US data came back with sub par results. Durable Goods figures came back over 1% down from already poor expectations at -1.7%, as Core Durable Goods (excluding Autos) dropped to -2.6%. New Home Sales fell for the fourth month running by just under 2% as the figure stood on 590,000, the lowest it has been since 1995. Though the figure returned higher than initially forecasted, the combination of the poor results combined with Durable Goods numbers and a small drop in Crude Oil Inventories sent the USD on a dive. The biggest concern on the return of the housing figures is that new homes are at some of the lowest average prices the American consumer has seen, and still no progress has been shown, which can only further concern investors regarding the spending of the world’s biggest consumer base.
Fed fund futures are now leaning toward a 50-50 chance that a rate cut of up to 50bp is to be expected by next month. What is worrisome is the lack of affect these cuts have had on the US economy. With the possibility of a US interest rate under 2%, one wonders if the Fed might be running out of solutions to pulling the US out of the depths of recession.
Today we await a host of important data from the US. Unemployment Claims are due for release, and should see a return of 370,000 jobless claims for last week. This figure is down from the last number of 378,000, but will still provide no help for the greenback. Forecasts also show a 0.6% annual growth over the fourth quarter of 2007 in Gross Domestic Product (GDP). The GDP figures could be the most concerning, as the US economy has seen its slowest growth in almost 5 years. With the halt in consumer spending, rising commodities prices, labor worries, and the unforgettable housing and credit crises a US recession seems imminent.
Speeches from Fed Governor Kroszner, Minneapolis Fed President Stern, and
Cleveland Fed President Pianalto will round out the economic calendar for Thursday, as we should expect more bearish dollar behavior.
The Greenback continued its bearish trend once again yesterday amidst surprisingly poor economic data. Selling of the dollar could have been forecasted, but was still expected to come much later on this week, if at all. Source: WikipediaInstead, a batch of unexpectedly bad figures from the US sent the dollar spiraling back down against a majority of its most traded currencies, notably the EUR/USD which pushed itself back over 1.56. The big surprise yesterday, was the return of Consumer Confidence numbers. Initially expected to drop only a couple points from its previous figure of 76.4, Consumer Confidence dropped to 64.5 the lowest it has been for over 5 years. As if that wasn’t enough to deter pro-dollar investors, the housing market is officially stuck in its worst slide since the 1980’s. Housing prices in the US fell by just under 11% in January, bringing the index to its lowest point since the figure’s inception in 1987.
The problems in the US look to be growing rapidly once again. Consumer Confidence being so low gives investors the grim outlook of the near future of the US economy, as the US consumer is still considered the worlds strongest. However, the housing slump is far more hurtful to the overall economic outlook. Poor employment, rising retail prices and the deteriorating existing homes market has left the Federal Reserve on the precarious position of possibly having to tweak interest rates once again.
Investors should feel somewhat hopeful about the long term state of the US economy, as last week’s 75bp cut of the interest rate by the Fed did help stifle credit worries for banks. Still, it is a crap shoot at this point as to when a significant turn around in the US economy will come. The NY Times reported earlier this week that they expect another 20,000 job cuts to come from the lucrative financial sector which should contribute to more bearish behavior by the greenback.
Today the economic calendar is packed with a batch of data, as this could be a defining day for the Dollar. Core Durable Goods Orders, Durable Goods Orders, New Home Sales and Crude Oil Inventories are all expected today. An important figure in preventing more of the bearish trend of the USD would be steady rise in Durable Goods. The figure is expected to improve and should help ease some tension in the US market. New Home Sales is expecting a slight drop, and we should hope it will only be slight, as any more negative news from the Housing sector can lead to major issues for the greenback. These figures will be accompanied by Treasury Secretary Paulson and Dallas Fed President Fisher scheduled to make speeches today, which will likely touch upon the growing concern of Consumer Confidence. Expect the greenback to continue its bearish trend today, unless we see surprisingly positive results from US data.
Source: Wikipedia The EUR/USD pair soared back over the 1.58 key level, at some points peaking close to 1.59. This does not bode well for the Fed, as many will look towards them once again to tweak interest rates to cope with the weakening economy which may force even more negative pressure on the Dollar. 
