Jun 09 2008
Crude Oil Continues to Soar
The greenback had a tough trading session last week, which was capped off by a huge bearish slip on Friday. Sparked by a batch of mediocre US data and positive EUR news, the USD saw losses throughout the week that saw a return to exchange rates it had during the height of the credit crisis, only several months ago. The oft traded EUR/USD pair was one of the more effected trading pairs of the week, as it saw fluctuation in the early parts of the week, dipping as low as 1.5360, before skyrocketing back to levels of 1.57 and above. The early part of the week saw decent fundamental news from the US, as ISM manufacturing, ADP NonFarm Employment Change and Unemployment Claims all showed improvement. Thursday’s unemployment claims were released at the same time as a press conference for the European Central Bank (ECB), which was where any hope of more dollar bullishness ended. The routinely hawkish President of the ECB Jean-Claude Trichet made market-moving news as he announced the likelihood of an unprecedented rate hike in the Euro-Zone (EZ) by July. Investors were privy to a bullish run on the EUR/USD that moved nearly 200 pips before the end of trading on Thursday.
Friday was equally important for the market as the release of NonFarm Payrolls and the US unemployment rate sent the market into what was an expected frenzy. NonFarm numbers came back at -49K, a more positive release then expected, still though it was the 5th straight month that we have seen the all important figure see negative results. The Unemployment rate provided the surprise of the day as it ballooned to 5.5%, its highest mark since late in 2004. The 0.5% hike brought immediate losses to the greenback against a majority of its currency rivals. As the day progressed, more details of the unemployment situation were felt throughout the US. With the bearishness of the USD came the rise of Crude Oil prices as the important commodity shot back up to record high rates of over $138 per barrel. Equally as important was a nearly 400-point drop in US stock markets.
Looking ahead to this week, we will see a batch of US data headlined by Michigan Consumer Sentiment, Core CPI, Retail Sales and the US Fed President Trade Balance. The fundamental forecast has the aforementioned making slight gains, except for Trade Balance. Still though it is hard to see how the US will manage to climb out of the current state of affairs, as rising commodities prices and investor wariness surrounding the USD will likely stunt any positive calendar news. Also expected next week are two important speeches by Federal Reserve Chairman Ben Bernanke. The Fed boss is under some scrutiny from US officials regarding the decrepit state of the US economy, and will likely address the current situation, hopefully with a feasible solution. Still though expect high volatility in and around the time of his comments.
Today, the US has a light news day as we expected Pending Home Sales and comments from New York Fed President Geithner. With a batch of outside data and another speech by ECB President Trichet, expect the greenback to continue its bearish trend.
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